EXCEL LEGACY CORP, 10-12G/A, 1998-02-10

EXCEL LEGACY CORP
10-12G/A, 1998-02-10
REAL ESTATE DEALERS (FOR THEIR OWN ACCOUNT)

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1998

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1
TO
FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934

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EXCEL LEGACY CORPORATION

(Exact Name of Registrant as Specified in its Charter)

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DELAWARE 33-0781747
(State of Incorporation or (I.R.S. Employer
Organization) Identification
No.)
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16955 VIA DEL CAMPO, SUITE 100
SAN DIEGO, CALIFORNIA 92127

(Address, Including Zip Code, of Principal Executive Offices)

(619) 485-9400
(Registrant's Telephone Number, Including Area Code)

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Securities to be registered pursuant to Section 12(b) of the Act: None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share
(Title of Class)

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INFORMATION REQUIRED IN REGISTRATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10

1. Business.............................. "SUMMARY"; "THE DISTRIBUTION--Background and Reasons for the
Distribution"; "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS"; "THE COMPANY"
and "BUSINESS AND PROPERTIES."

2. Financial Information................. "SUMMARY"; "RISK FACTORS"; "PRO FORMA COMBINED CAPITALIZATION";
"UNAUDITED PRO FORMA FINANCIAL INFORMATION"; "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and "FINANCIAL STATEMENTS."

3. Properties............................ "BUSINESS AND PROPERTIES."

4. Security Ownership of Certain "MANAGEMENT" and "SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL
Beneficial Owners and Management...... OWNERS AND MANAGEMENT."

5. Directors and Executive Officers...... "SUMMARY"; "RISK FACTORS"; "THE COMPANY" and "MANAGEMENT."

6. Executive Compensation................ "MANAGEMENT--Executive Officer Compensation."

7. Certain Relationships and Related "CERTAIN TRANSACTIONS."
Transactions..........................

8. Legal Proceedings..................... "BUSINESS AND PROPERTIES--Legal Proceedings."

9. Market Price of and Dividends on the "SUMMARY"; "THE DISTRIBUTION--Quotation and Trading of Company
Registrant's Common Equity and Related Common Stock; Dividend Policy" and "RISK FACTORS--Dividend
Stockholder Matters................... Policy."

10. Recent Sales of Unregistered None.
Securities............................

11. Description of Registrant's Securities "LEGACY CERTIFICATE OF INCORPORATION AND BYLAWS" and "DESCRIPTION
to be Registered...................... OF THE COMPANY'S CAPITAL STOCK."

12. Indemnification of Directors and "MANAGEMENT--Indemnification Agreements"; "LEGACY CERTIFICATE OF
Officers.............................. INCORPORATION AND BYLAWS--Indemnification and Advancement of
Expenses" and "LIABILITY AND INDEMNIFICATION OF OFFICERS AND
DIRECTORS OF THE COMPANY."
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ITEM
ITEM NO. CAPTION LOCATION IN INFORMATION STATEMENT
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13. Financial Statements and Supplementary "SUMMARY"; "PRO FORMA COMBINED CAPITALIZATION"; "UNAUDITED PRO
Data.................................. FORMA FINANCIAL INFORMATION"; "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
"FINANCIAL STATEMENTS."

14. Changes in and Disagreements with None.
Accountants on Accounting and
Financial Disclosure..................

15. Financial Statements and Exhibits.....

(a) Financial Statements and
Schedules

(1) Financial Statements: "FINANCIAL STATEMENTS."

(b) Exhibits:
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EXHIBIT
NUMBER DESCRIPTION
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3.1(3) Form of Amended and Restated Certificate of Incorporation of Excel
Legacy Corporation (included as Annex I to Information Sheet).

3.2(3) Form of Amended and Restated Bylaws of Excel Legacy Corporation
(included as Annex II to Information Statement).

4.1(1) Form of Common Stock Certificate.

4.2(1) Form of Certificate of Designation of Series A Preferred Stock.

10.1(3) Form of 1998 Stock Option Plan of Excel Legacy Corporation
(included as Annex III to Information Statement).

10.2(3) Form of Intercompany Agreement.

10.3(3) Form of Distribution Agreement.

10.4(2) Form of Employee Benefits Allocation Agreement.

10.5(1) Form of Tax Sharing Agreement.

10.6(1) Form of Transitional Services Agreement.

10.7(1) Form of Indemnity Agreement.

21.1(3) Subsidiaries of Excel Legacy Corporation.

23.1(1) Consent of Coopers & Lybrand L.L.P.

23.2(1) Consent of Latham & Watkins.

27.1(3) Financial Data Schedule.
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(1) Filed herewith.

(2) To be filed by amendment.

(3) Previously filed.

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PRELIMINARY COPIES

EXCEL REALTY TRUST, INC.

16955 Via Del Campo,
Suite 100
San Diego, California
92127
(619) 485-9400
, 1998

Dear Stockholder:

The Board of Directors of Excel Realty Trust, Inc. ("Excel") has approved
the distribution (the "Distribution") to holders of Excel common stock, through
a special dividend, of the common stock of Excel Legacy Corporation ("Legacy").
Legacy was organized to create and realize value by identifying and making
opportunistic real estate investments through the direct acquisition,
rehabilitation, development, financing and management of real properties and/or
participation in these activities through the purchase of debt instruments or
equity interests of entities engaged in such real estate businesses.

The Board of Directors of Excel believes that the Distribution is in the
best interests of Excel stockholders. The completion of the Distribution will
permit each of Legacy and Excel to concentrate on its core business. The Board
of Directors of Excel believes that the Distribution also will allow financial
markets to better understand and recognize the merits of the two businesses. The
common stock of Excel will continue to be listed on the New York Stock Exchange.
Legacy initially intends to apply to have the shares of Legacy common stock
approved for quotation and trading on the OTC Bulletin Board.

If you are a holder of Excel common stock of record at the close of business
on , 1998, you will receive as a dividend one share of Legacy common
stock for each share of Excel common stock you hold. The Distribution will be a
taxable transaction to the stockholders of Excel. The Distribution is scheduled
to occur on or about , 1998. We expect to mail the Legacy common
stock certificates shortly thereafter. Stockholders of Excel on the record date
must retain their Excel share certificates which will continue to represent
shares of Excel common stock.

The enclosed Information Statement contains information about the
Distribution and about Legacy. We urge you to read it carefully. Holders of
Excel common stock are not required to take any action to participate in the
Distribution. A stockholder vote is not required in connection with this matter
and, accordingly, your proxy is not being sought.

We are optimistic about the prospects for Excel and Legacy and appreciate
your continued support.

Sincerely,

Gary B. Sabin
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXCEL REALTY TRUST, INC.
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INFORMATION STATEMENT
EXCEL LEGACY CORPORATION
COMMON STOCK

This Information Statement (the "Information Statement") is being furnished
in connection with the distribution (the "Distribution") to holders of common
stock, par value $.01 per share ("Excel Common Stock"), of Excel Realty Trust,
Inc., a Maryland corporation ("Excel"), of all of the outstanding shares of
common stock, par value $.01 per share ("Company Common Stock"), of Excel Legacy
Corporation, a Delaware corporation ("Legacy" or the "Company"), pursuant to the
terms of a Distribution Agreement to be entered into between Excel and Legacy
(the "Distribution Agreement"). Legacy was organized to create and realize value
by identifying and making opportunistic real estate investments through the
direct acquisition, rehabilitation, development, financing and management of
real properties and/or participation in these activities through the purchase of
debt instruments or equity interests of entities engaged in such real estate
businesses. See "RISK FACTORS"; "THE COMPANY" and "BUSINESS AND PROPERTIES."

Shares of Company Common Stock will be distributed to holders of record of
Excel Common Stock as of the close of business on , 1998 (the "Record
Date"). Each such holder will receive one share of Company Common Stock for each
share of Excel Common Stock held on the Record Date. The Distribution will be a
taxable event to the stockholders of Excel. See "THE DISTRIBUTION--Material
Federal Income Tax Consequences of the Distribution." The Distribution is
scheduled to occur on or about , 1998 (the "Distribution Date"). No
consideration will be paid by holders of Excel Common Stock for shares of
Company Common Stock. See "THE DISTRIBUTION--Manner of Effecting the
Distribution."

There is no current trading market for the Company Common Stock, although a
"when issued" market may develop prior to the Distribution Date. The Company
initially intends to apply to have the shares of Company Common Stock approved
for quotation and trading on the OTC Bulletin Board under the symbol "XELC." See
"THE DISTRIBUTION--Quotation and Trading of Company Common Stock; Dividend
Policy."

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NO STOCKHOLDER APPROVAL OF THE DISTRIBUTION IS REQUIRED OR SOUGHT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT.
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THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
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Stockholders of Excel with inquiries related to the Distribution should
contact Graham R. Bullick, Ph.D., Senior Vice President, Excel Realty Trust,
Inc., 16955 Via Del Campo, Suite 100, San Diego, California 92127, telephone:
(619) 485-9400; or Excel's stock transfer agent, BankBoston, N.A., c/o Boston
EquiServe, P.O. Box 1666, Boston, Massachusetts 02105, telephone: (800)
730-6001. BankBoston, N.A. is also acting as distribution agent for the
Distribution.

THE DATE OF THIS INFORMATION STATEMENT IS , 1998.
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INFORMATION STATEMENT
TABLE OF CONTENTS

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AVAILABLE INFORMATION...................................................................................... 1
SUMMARY OF INFORMATION..................................................................................... 2
THE DISTRIBUTION........................................................................................... 10
Background and Reasons for the Distribution.............................................................. 10
Distribution Agent....................................................................................... 11
Manner of Effecting the Distribution..................................................................... 11
Results of the Distribution.............................................................................. 12
Material Federal Income Tax Consequences of the Distribution............................................. 12
Quotation and Trading of Company Common Stock; Dividend Policy........................................... 15
Conditions; Termination.................................................................................. 16
Reasons for Furnishing the Information Statement......................................................... 16
RISK FACTORS............................................................................................... 17
Recently Formed Entity; Lack of Independent Operating History............................................ 17
Possible Conflicts with Excel After the Distribution..................................................... 17
Failure of Excel to Qualify as a REIT.................................................................... 18
Reliance on Major Tenants................................................................................ 18
Control by Executive Officers and Directors.............................................................. 18
Tax Consequences of the Distribution..................................................................... 19
Absence of Future Funding Commitments; Need for Future Capital........................................... 19
Dilution................................................................................................. 20
Absence of Prior Trading Market for the Company Common Stock; Potential Volatility....................... 20
Shares Eligible for Future Sale.......................................................................... 20
Potential Adverse Effect on Excel Common Stock of Distribution........................................... 21
Difficulty of Locating Suitable Investments; Competition................................................. 21
Risks Associated with Acquisition, Development, Construction and Renovation Activities................... 21
Operating Risks.......................................................................................... 22
Dependence on Rental Income from Real Property........................................................... 23
Adverse Consequences of Debt Financing................................................................... 23
Risks Associated with Equity Investments in and with Third Parties; Potential Lack of
Control of Management.................................................................................. 23
Illiquidity of Real Estate Investments................................................................... 24
Disadvantages of Investments in Debt Instruments......................................................... 24
Disadvantages of Investments in Mortgage Loans........................................................... 24
Potential Losses on Investments in Commercial Mortgage-Backed Securities................................. 25
Limitations on Remedies.................................................................................. 25
Third-Party Bankruptcy Risks............................................................................. 25
Risks Associated with Potential Registration Under Investment Company Act................................ 26
Uninsured Losses......................................................................................... 26
Potential Environmental Liability Related to the Properties.............................................. 26
Changes in Policies Without Stockholder Approval......................................................... 27
Hedging Policies/Risks................................................................................... 27
Dividend Policy.......................................................................................... 27
Certain Anti-Takeover Features........................................................................... 27
Dependence on Key Personnel.............................................................................. 28
Costs of Compliance with the Americans with Disabilities Act and Similar Laws............................ 28
Noncompliance with Other Laws............................................................................ 28
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RELATIONSHIP BETWEEN LEGACY AND EXCEL AFTER THE DISTRIBUTION............................................... 29
Distribution Agreement................................................................................... 29
Employee Benefits Allocation Agreement................................................................... 29
Tax Sharing Agreement.................................................................................... 30
Transitional Services Agreement.......................................................................... 30
Intercompany Agreement................................................................................... 30
Policies and Procedures for Addressing Conflicts......................................................... 30
REGULATORY APPROVALS....................................................................................... 31
PRO FORMA COMBINED CAPITALIZATION.......................................................................... 32
EXCEL LEGACY CORPORATION UNAUDITED PRO FORMA FINANCIAL INFORMATION......................................... 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................... 37
Nature of Business....................................................................................... 37
Liquidity................................................................................................ 37
Results of Operations.................................................................................... 37
Capital Resources........................................................................................ 39
THE COMPANY................................................................................................ 40
General.................................................................................................. 40
Business Strategy........................................................................................ 42
Intercompany Agreement................................................................................... 45
Initial Capital and Financing............................................................................ 45
BUSINESS AND PROPERTIES.................................................................................... 46
Properties............................................................................................... 46
Notes Receivable......................................................................................... 54
Principal Tenants........................................................................................ 56
Environmental Matters.................................................................................... 57
Employees................................................................................................ 57
Corporate Headquarters................................................................................... 57
Legal Proceedings........................................................................................ 57
MANAGEMENT................................................................................................. 58
Board of Directors....................................................................................... 58
Committees of the Board of Directors..................................................................... 58
Compensation of the Board of Directors................................................................... 59
Executive Officers....................................................................................... 59
Executive Officer Compensation........................................................................... 60
Legacy Stock Option Plan................................................................................. 61
Indemnification Agreements............................................................................... 63
CERTAIN TRANSACTIONS....................................................................................... 65
Interests Relating to Excel.............................................................................. 65
Private Placements....................................................................................... 65
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................................... 66
LEGACY CERTIFICATE OF INCORPORATION AND BYLAWS............................................................. 68
Authorized Stock......................................................................................... 68
Directors................................................................................................ 68
Liability for Monetary Damages........................................................................... 68
Anti-Takeover Effect of Authorized But Undesignated Preferred Stock...................................... 68
Indemnification and Advancement of Expenses.............................................................. 69
Amendment of the Company Certificate and Bylaws.......................................................... 70
Transactions With Interested Officers or Directors....................................................... 70
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DESCRIPTION OF THE COMPANY'S CAPITAL STOCK................................................................. 71
General.................................................................................................. 71
Common Stock............................................................................................. 71
Series A Preferred Stock................................................................................. 72
Registration Rights...................................................................................... 74
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY..................................... 75
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
ANNEX I-- AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF LEGACY
ANNEX II--AMENDED AND RESTATED BYLAWS OF LEGACY
ANNEX III--LEGACY STOCK OPTION PLAN
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AVAILABLE INFORMATION

Legacy has filed a Registration Statement on Form 10 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
respect to the Company Common Stock. This Information Statement does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. For further information, reference is made hereby to the
Registration Statement and such exhibits and schedules. Statements contained
herein concerning any documents are not necessarily complete and, in each
instance, reference is made to the copies of such documents filed as exhibits to
the Registration Statement. Each such statement is qualified in its entirety by
such reference. Copies of these documents may be inspected without charge at the
principal office of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at Seven World Trade
Center, Suite 1300, New York, New York 10048 and at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and copies of all or any part thereof may
be obtained from the Commission upon payment of the charges prescribed by the
Commission. Copies of this material also should be available through the
Internet by using "Quick Forms Lookup" at the SEC EDGAR Archive, the address of
which is http:// www.sec.gov.

Following the Distribution, the Company will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. The Company also will be subject to the proxy
solicitation requirements of the Exchange Act and, accordingly, will furnish
audited financial statements to its stockholders in connection with its annual
meetings of stockholders.

NO PERSON IS AUTHORIZED BY EXCEL OR THE COMPANY TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED.

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SUMMARY OF INFORMATION

THIS SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS SET FORTH ELSEWHERE IN THIS INFORMATION STATEMENT. CAPITALIZED TERMS
USED BUT NOT DEFINED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS INFORMATION
STATEMENT. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS INFORMATION
STATEMENT TO THE COMPANY OR LEGACY PRIOR TO CONSUMMATION OF THE DISTRIBUTION
INCLUDE THE ASSETS TO BE TRANSFERRED TO LEGACY PURSUANT TO THE DISTRIBUTION
AGREEMENT, AND REFERENCES IN THIS INFORMATION STATEMENT TO EXCEL INCLUDE ITS
CONSOLIDATED SUBSIDIARIES.

THE DISTRIBUTION

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Distributing Company.............. Excel Realty Trust, Inc., a Maryland corporation
("Excel"). Prior to the Distribution, Excel and ERT
Development Corporation, a Delaware corporation of which
Excel owns 100% of the outstanding preferred shares
("EDV"), will transfer to the Company certain real
properties, notes receivable and related assets and
liabilities currently held by Excel and EDV. See "BUSI-
NESS AND PROPERTIES."
Distributed Company............... Excel Legacy Corporation, a recently-formed Delaware
corporation ("Legacy" or the "Company"). The Company
currently owns three properties, two of which are single
tenant properties that represent an aggregate of 220,000
square feet of gross leasable area ("GLA") and
$4,933,000 in annual base rental income. The remaining
property is a parcel of vacant land currently being
redeveloped by the Company. See "THE COMPANY" and
"BUSINESS AND PROPERTIES."
Distribution Ratio................ One share of Company Common Stock for each share of
Excel Common Stock held on the Record Date.
Shares to be Outstanding Following
the Distribution................ Based on shares of Excel Common Stock
outstanding on the Record Date, approximately
shares of Company Common Stock. In addition, the Company
has obtained commitments to buy, effective upon
consummation of the Distribution, (i) 9,195,224 shares
of Company Common Stock in a private placement to
certain of the Company's officers, and (ii)
shares of Series A Cumulative Convertible Preferred
Stock of the Company ("Series A Preferred Stock") in a
private placement to certain "qualified institutional
buyers" (as such term is defined in Rule 144A under the
Securities Act of 1933, as amended (the "Securities
Act")), which shares will be convertible at any time
into shares of Company Common Stock. The Company has
agreed to loan to certain of its officers, in connection
with their purchase of Company Common Stock described
above, 50.0% of the purchase price therefor (an
aggregate amount of approximately $11.0 million). See
"CERTAIN TRANSACTIONS."
Record Date....................... , 1998 (5:00 p.m. Eastern Standard Time).
Distribution Date................. , 1998.
Mailing Date...................... Certificates representing the shares of Company Common
Stock to be distributed pursuant to the Distribution
will be delivered to the Distribution Agent on the
Distribution Date. The Distribution Agent will mail
certificates representing the shares of
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Company Common Stock to holders of Excel Common Stock as
soon as practicable thereafter. Holders of Excel Common
Stock should not send stock certificates to Excel, the
Company or the Distribution Agent. See "THE
DISTRIBUTION--Manner of Effecting the Distribution."
Conditions to the Distribution.... The Distribution is conditioned upon, among other
things, declaration of the special dividend by the Board
of Directors of Excel (the "Excel Board"). The Excel
Board has reserved the right to waive any conditions to
the Distribution or, even if the conditions to the
Distribution are satisfied, to abandon, defer or modify
the Distribution at any time prior to the Distribution
Date. See "THE DISTRIBUTION--Conditions; Termination."
Reasons for the Distribution...... Excel is a self-administered, self-managed real estate
investment trust ("REIT"). Because investors are seeking
a consistent and growing income stream from their REIT
investments, REITs are under constant pressure to (i)
grow recurring cash flow, known as funds from operations
("FFO"), an indicator of performance in the REIT
industry, and (ii) maintain a low leverage ratio (debt
to total capitalization, one measure used to determine
the relative risk of that cash flow stream, as rising
interest rates can diminish FFO and impact dividends).
As a result, REITs have generally been hesitant to
participate in long-term, higher-risk development
projects or to bring their leverage ratios to above
40.0%. In addition, the tax laws governing REITs include
limitations on (i) the types of assets that REITs may
own and the time period that real estate may be held,
restricting REITs from investing in operating companies
and equity and debt securities, and participating in
short-term trading opportunities, and (ii) the ability
of REITs to retain earnings, requiring REITs to
distribute 95.0% of net taxable income, excluding
capital gains, each year. Further, because gains on the
sales of properties are not included in the calculation
of FFO, REITs are dissuaded from buying distressed
assets which may have substantial long-term appreciation
potential but lack immediate cash flow. The Excel Board
believes that significant opportunities are available to
those investors that are not restricted by the tax laws
governing REITs or influenced by public market
perception. Thus, the Excel Board determined that it is
in the best interests of Excel and its stockholders to
organize the Company to pursue such opportunities, to
transfer to the Company certain real properties, notes
receivable and related assets and liabilities currently
held by Excel and EDV, and to spin-off the Company to
the Excel stockholders. The Distribution will enable
investors who own both Excel Common Stock and Company
Common Stock to participate in the benefits of the REIT
operations of Excel and the non-REIT operations of the
Company. See "THE DISTRIBUTION--Background and Reasons
for the Distribution."
Eleven of the properties to be transferred to the
Company by Excel and EDV are single tenant properties
subject to long-term
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leases. Although ownership of these properties by Excel
is consistent with the limitations on REITs described
above, the management of Excel believes that optimal
yields on investments in such properties can only be
obtained when the ratio of debt to equity exceeds 80.0%
of a given property's fair market value. As described
above, such leverage ratios far exceed the expectations
for a REIT. Thus, Excel believes that it is in the best
interests of Excel and its stockholders to transfer
these properties to the Company.
The remaining properties to be transferred to the
Company by Excel and EDV are those that will involve
long-term restructuring or redevelopment activities or
are currently undeveloped (i.e., raw land). Because
these properties have no or limited cash flow as a
result of required rehabilitation or development or are
not being substantially leased, substantial value
appreciation from these investments is not immediately
realized. As discussed above, the mandatory distribution
requirements applicable to REITs make ownership of such
properties less desirable for a REIT because of their
limited cash flow. Thus, Excel believes that such
properties represent high return opportunities that the
Company will be better positioned to pursue. See
"BUSINESS AND PROPERTIES--Properties."
The Company is also receiving four notes receivable from
EDV. The management of Excel believes that the projects
underlying these notes receivable are consistent with
the Company's strategy to obtain long-term, mixed-use
development projects which may take three to five years
to fully develop. In addition, these projects will not
generate short-term cash flow and are therefore not as
attractive to Excel because of the mandatory
distribution requirements applicable to REITs. See
"BUSINESS AND PROPERTIES--Notes Receivable."
The Company and Excel will enter into the Intercompany
Agreement (as defined below) on or prior to the
Distribution Date to provide each other with rights to
participate in certain transactions. See "RISK
FACTORS--Possible Conflicts with Excel After the
Distribution"; "RELATIONSHIP BETWEEN LEGACY AND EXCEL
AFTER THE DISTRIBUTION--Policies and Procedures for
Addressing Conflicts" and "THE COMPANY--Intercompany
Agreement."
Assets to be Transferred to the
Company......................... Prior to the Distribution, Excel and EDV will transfer
to the Company a total of 14 properties and four notes
receivable. Eleven of the properties to be transferred
to the Company are single tenant properties and
represent an aggregate of 984,966 square feet of GLA,
and $5,043,084 in annual base rental income. Each of
these properties is subject to a long-term lease, the
earliest of which expires in 2002. The remaining three
properties to be transferred to the Company consist of
(i) a parcel of vacant land currently being redeveloped,
(ii) an office building containing 64,262 square feet of
GLA with an annual base rental income of $1,087,190 and
(iii) an enclosed shopping
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mall containing 520,481 square feet of GLA. The
aggregate principal amount of the notes receivable to be
transferred to the Company totals $32.9 million. As of
the Distribution Date, AMC Multi-Cinema, Inc. ("AMC"),
Wal-Mart Stores, Inc. ("Wal-Mart") and Lowe's Home
Centers, Inc. ("Lowe's") will be the Company's largest
tenants, representing approximately 45.2%, 34.2% and
11.1% of the Company's total revenue as of such date,
respectively. See "RISK FACTORS--Reliance on Major
Tenants" and "BUSINESS AND PROPERTIES."
Business Strategy of the The Company intends to pursue a variety of real
Company......................... estate-related activities, including (i) developing
long-term, mixed-use development/entertainment projects
that have the potential for substantial capital gains
but which may take three to five years to fully develop,
(ii) acquiring single tenant properties that can be
highly leveraged with fixed rate debt that amortizes
over the term of the property's tenant leases, (iii)
purchasing portfolios of properties on a wholesale
basis, then selling the properties individually on a
retail basis, (iv) investing in properties requiring
significant restructuring or redevelopment in order to
create substantial value, such as changing the use,
tenant mix or focus of a property, and (v) acquiring
debt or equity securities in real estate operating
companies, including defaulted debt at a discount to the
value of the underlying asset securing the debt. See
"THE COMPANY--Business Strategy."
Federal Income Tax Consequences to
Excel Stockholders.............. The Distribution will be a taxable event to Excel's
stockholders for Federal income tax purposes. The amount
of the Distribution received by each Excel stockholder
will be treated as a dividend (i.e., as ordinary income)
to such stockholder to the extent of such stockholder's
pro rata share of Excel's current and accumulated
earnings and profits. The amount of the Distribution
received by each Excel stockholder that is not treated
as a dividend will first be treated as a nontaxable
return of capital to the extent of such stockholder's
basis in his Excel Common Stock, and then generally as
capital gain. The amount of the Distribution received by
each Excel stockholder for Federal income tax purposes
will be the fair market value of the Company Common
Stock received by such stockholder as of the
Distribution Date. Excel will make a determination of
the fair market value of the Company Common Stock as of
the Distribution Date. Excel will report the amount of
the Distribution received by each stockholder to such
stockholder and to the Internal Revenue Service (the
"IRS") on IRS Form 1099-DIV. There can be no assurance
that the IRS or the courts will agree with the amount
determined by Excel. Excel stockholders are urged to
consult their own tax advisors as to the specific tax
consequences to them of the Distribution. See "THE
DISTRIBUTION--Material Federal Income Tax Consequences
of the Distribution."
Federal Income Tax Consequences to
Excel........................... Excel will recognize gain as a result of the transfer of
certain
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properties and assets to the Company in exchange for
Company Common Stock. Such gain will be the sum of (i)
the excess of the fair market value of the Company
Common Stock over Excel's adjusted basis in such assets,
and (ii) the aggregate amount of liabilities assumed by
the Company. Excel will recognize gain upon the
Distribution equal to the excess, if any, of the fair
market value of the Company Common Stock on the
Distribution Date over Excel's tax basis in such stock.
Because the Distribution will occur immediately after
the transfer of assets to the Company, the value of the
Company Common Stock distributed should equal Excel's
basis in such stock, as a result of which Excel should
recognize no additional gain on the Distribution. See
"THE DISTRIBUTION--Material Federal Income Tax
Consequences of the Distribution."
Trading Market.................... There is currently no public market for the Company
Common Stock. The Company initially intends to apply to
have the Company Common Stock approved for quotation and
trading on the OTC Bulletin Board under the symbol
"XELC." See "THE DISTRIBUTION--Quotation and Trading of
the Company Common Stock; Dividend Policy" and "RISK
FACTORS-- Absence of Prior Trading Market for Company
Common Stock; Potential Volatility."
Distribution Agent and Transfer
Agent for the Company
Common Stock.................... BankBoston, N.A.
Dividends......................... The Company's dividend policy will be established by the
Board of Directors of the Company (the "Company Board")
from time to time based on the results of operations and
financial condition of the Company and such other
business considerations as the Company Board considers
relevant. The Company presently intends to retain future
earnings to finance the growth and development of its
business; and, therefore, the Company does not currently
anticipate paying any cash dividends. Any future
determination relating to dividend policy will be made
at the discretion of the Company Board. See "THE
DISTRIBUTION--Quotation and Trading of Company Common
Stock; Dividend Policy" and "RISK FACTORS--Dividend
Policy."
Anti-Takeover Provisions.......... The Amended and Restated Certificate of Incorporation of
the Company (the "Company Certificate") and the Amended
and Restated Bylaws of the Company (the "Company
Bylaws"), as well as Delaware statutory law, contain
provisions that may have the effect of discouraging an
acquisition of control of the Company not approved by
the Company Board. Such provisions include ARTICLE
FOURTH of the Company Certificate which authorizes the
Company Board to issue additional shares of preferred
stock of the Company, in one or more series, without
further action by Company stockholders, and to establish
the rights and preferences (including the convertibility
of such shares of preferred stock into Company Common
Stock) of any series of preferred stock so issued. These
provisions have been designed to enable the Company to
develop its business and
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foster its long-term growth without disruptions caused
by the threat of a takeover not deemed by the Company
Board to be in the best interests of the Company and its
stockholders. Such provisions also may have the effect
of discouraging third parties from making proposals
involving an acquisition or change of control of the
Company, although such proposals, if made, might be
considered desirable by a majority of the Company's
stockholders. Such provisions could further have the
effect of making it more difficult for third parties to
cause the replacement of the current management of the
Company without the concurrence of the Company Board.
See "RISK FACTORS-- Certain Anti-Takeover Features";
"LEGACY CERTIFICATE OF INCORPORATION AND BYLAWS" and
"DESCRIPTION OF THE COMPANY'S CAPITAL STOCK."
Risk Factors...................... See "RISK FACTORS" for a discussion of factors that
should be considered in connection with the Company
Common Stock received in the Distribution.
Relationship with Excel after the
Distribution.................... Excel will have no stock ownership in the Company upon
consummation of the Distribution. For purposes of
governing certain ongoing relationships between the
Company and Excel after the Distribution and to provide
for an orderly transition, the Company and Excel have
entered into or will enter into certain agreements. Such
agreements include: (i) the Distribution Agreement
providing for, among other things, the Distribution and
the division between the Company and Excel of certain
assets and liabilities; (ii) an Employee Benefits
Allocation Agreement, providing for certain allocations
of responsibilities with respect to employee
compensation, benefits and labor matters; (iii) a Tax
Sharing Agreement pursuant to which the Company and
Excel will agree to allocate tax liabilities that relate
to periods prior to the Distribution Date; and (iv) a
Transitional Services Agreement pursuant to which Excel
will provide certain property acquisition, management
and other services to the Company on a transitional
basis. See "RELATIONSHIP BETWEEN LEGACY AND EXCEL AFTER
THE DISTRIBUTION."
Policies and Procedures for
Addressing Conflicts............ The Company and Excel intend to pursue separate and
distinct business strategies to minimize potential
conflicts of interest between the two companies.
Nonetheless, the on-going relationships between the
Company and Excel may present conflict situations for
certain officers and directors. Certain persons will
serve as officers and/or directors of both the Company
and Excel, and also will own (or have options or other
rights to acquire) a significant number of shares of
common stock in both companies. The Company and Excel
will adopt appropriate policies and procedures on or
prior to the Distribution Date to be followed by the
Board of Directors of each company to address potential
conflicts. Such procedures include requiring the persons
serving as directors of both companies to abstain
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from voting as directors with respect to matters that
present a significant conflict of interest between the
companies. In addition, the Company Certificate contains
a specific purpose clause which identifies at the outset
which types of opportunities will be pursued by the
Company. This clause provides that the Company's purpose
includes performing an agreement between the Company and
Excel (the "Intercompany Agreement"), which prohibits
the Company from engaging in certain activities or
making certain investments unless Excel was first
offered the opportunity and declined to pursue such
activities or investments. See "RISK FACTORS--Possible
Conflicts with Excel After the Distribution";
"RELATIONSHIP BETWEEN LEGACY AND EXCEL AFTER THE
DISTRIBUTION--Policies and Procedures for Addressing
Conflicts" and "THE COMPANY--Intercompany Agreement."
Interests of Certain Persons in
the Distribution................ As of the Distribution Date, the Company Board will
consist of Gary B. Sabin, who is currently Chairman,
President and Chief Executive Officer of Excel and who
will serve in the same positions with the Company,
Richard B. Muir, who is currently Executive Vice
President and Secretary of Excel and who will serve in
the same positions with the Company, John H. Wilmot and
Robert E. Parsons, Jr., who are currently directors of
Excel, and and , who are not
affiliated with Excel. As of the Distribution Date, the
executive officers of the Company will include Mr.
Sabin, Mr. Muir, Graham R. Bullick, who is currently
Senior Vice President--Capital Markets of Excel and who
will serve in the same position with the Company, Ronald
H. Sabin, who is currently Senior Vice President--Asset
Management of Excel and who will serve in the same
position with the Company, David A. Lund, who is
currently Chief Financial Officer of Excel and who will
serve in the same position with the Company, S. Eric
Ottesen, who is currently Senior Vice President, General
Counsel and Assistant Secretary of Excel and who will
serve in the same positions with the Company, and Mark
T. Burton, who is currently Senior Vice
President--Acquisitions of Excel and who will serve in
the same position with the Company. See "MANAGEMENT."
Based solely on their ownership of Excel Common Stock
and options to acquire Excel Common Stock as of the
Record Date, the executive officers and directors of the
Company will beneficially own an aggregate of
shares, or approximately %, of the outstanding
Company Common Stock immediately following the
Distribution. In addition, certain officers of the
Company (i) have agreed to purchase, effective upon
consummation of the Distribution, 9,195,224 shares of
Company Common Stock in a private placement at a price
per share of $2.39 (the estimated market value of the
Company Common Stock as of the Distribution Date based
upon the value of the assets being transferred to the
Company), for an aggregate purchase price of
approximately $22.0 million, and (ii) will be granted
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options to acquire 3,100,000 shares of Company Common
Stock under the 1998 Stock Option Plan of Excel Legacy
Corporation (the "Legacy Stock Option Plan") upon
consummation of the Distribution. As a result, the
executive officers and directors of the Company will
beneficially own or have the right to acquire an
aggregate of shares, or approximately %, of
the outstanding Company Common Stock immediately
following the Distribution. The Company has agreed to
loan to certain of its officers, in connection with
their purchase of Company Common Stock described above,
50.0% of the purchase price therefor (an aggregate
amount of approximately $11.0 million). See "RISK
FACTORS--Control by Executive Officers and Directors";
"MANAGEMENT--Legacy Stock Option Plan"; "CERTAIN
TRANSACTIONS" and "SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
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THE DISTRIBUTION

BACKGROUND AND REASONS FOR THE DISTRIBUTION

Excel is a self-administered, self-managed REIT which acquires, owns and
manages neighborhood and community shopping centers and other retail and
commercial properties. To a large extent, public REITs, including Excel, manage
their property portfolios with consideration to both public market perceptions
and tax laws. Because investors are seeking a consistent and growing income
stream from their REIT investments, REITs are under constant pressure to (i)
grow FFO, and (ii) maintain a low leverage ratio (debt to total capitalization,
one measure used to determine the relative risk of that cash flow stream, as
rising interest rates can diminish FFO and impact dividends). As a result, REITs
have generally been hesitant to participate in long-term, higher-risk
development projects or to bring their leverage ratios to above 40.0%. In
addition, the tax laws governing REITs include limitations on (i) the types of
assets that REITs may own and the time period that real estate may be held,
restricting REITs from investing in operating companies and equity and debt
securities, and participating in short-term trading opportunities, and (ii) the
ability of REITs to retain earnings, requiring REITs to distribute 95.0% of net
taxable income, excluding capital gains, each year. Further, because gains on
the sales of properties are not included in the calculation of FFO, REITs are
dissuaded from buying distressed assets which may have substantial long-term
appreciation potential but lack immediate cash flow. Thus, the Excel Board
determined that it is in the best interests of Excel and its stockholders to
organize the Company to pursue opportunities available to those investors that
are not restricted by the Federal income tax laws governing REITs or influenced
by public market perception with regard to REIT securities, to transfer to the
Company certain real properties, notes receivable and related assets and
liabilities currently held by Excel and EDV, and to spin-off the Company to the
Excel stockholders. The Distribution will enable investors who own both Excel
Common Stock and Company Common Stock to participate in the benefits of the REIT
operations of Excel and the non-REIT operations of the Company.

Eleven of the properties to be transferred to the Company by Excel and EDV
are single tenant properties subject to long-term leases. Although ownership of
these properties by Excel is consistent with the limitations on REITs described
above, the management of Excel believes that optimal yields on investments in
such properties can only be obtained when the ratio of debt to equity exceeds
80.0% of a given property's fair market value. As described above, such leverage
ratios far exceed the expectations for a REIT. Thus, Excel believes that it is
in the best interests of Excel and its stockholders to transfer these properties
to the Company.

The remaining properties to be transferred to the Company by Excel and EDV
are those that will involve long-term restructuring or redevelopment activities
or are currently undeveloped (i.e., raw land). Because these properties have no
or limited cash flow as a result of required rehabilitation or development or
are not being substantially leased, substantial value appreciation from these
investments is not immediately realized. As discussed above, the mandatory
distribution requirements applicable to REITs make ownership of such properties
less desirable for a REIT because of their limited cash flow. Thus, Excel
believes that such properties represent high return opportunities that the
Company will be better positioned to pursue. See "BUSINESS AND
PROPERTIES--Properties."

The Company is also receiving four notes receivable from EDV. The management
of Excel believes that the projects underlying these notes receivable are
consistent with the Company's strategy to obtain long-term, mixed-use
development projects which may take three to five years to fully develop. In
addition, these projects will not generate short-term cash flow and are
therefore not as attractive to Excel because of the mandatory distribution
requirements applicable to REITs. See "BUSINESS AND PROPERTIES-- Notes
Receivable."

The Company intends to create and realize value by identifying and making
opportunistic real estate investments through the direct acquisition,
rehabilitation, development, financing and management of real

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properties and/or participation in these activities through the purchase of debt
instruments or equity interests of entities engaged in such real estate
businesses.

In this regard, the Company Certificate contains a specific purpose clause
which identifies at the outset which types of opportunities will be pursued by
the Company. This clause provides that the Company's purpose includes performing
the Intercompany Agreement, which prohibits, for so long as the Intercompany
Agreement remains in effect, the Company from engaging in certain activities or
making certain investments unless Excel was first offered the opportunity and
declined to pursue such activities or investments. See "RISK FACTORS--Possible
Conflicts with Excel After the Distribution"; "RELATIONSHIP BETWEEN LEGACY AND
EXCEL AFTER THE DISTRIBUTION--Policies and Procedures for Addressing Conflicts"
and "THE COMPANY--Intercompany Agreement."

The Excel Board recognized in its planning that the Distribution would
result in a transaction taxable to Excel stockholders and possibly to Excel
depending on the fair market value of the Company Common Stock on the
Distribution Date. Due to the nature of the assets to be transferred to the
Company and the amount and duration of Excel's holdings thereof, Excel and the
Company are not positioned to effect the Distribution on a tax-free basis. The
Excel Board has considered that Excel's substantial tax basis in the Company
Common Stock (and prior to their transfer to the Company, in the assets to be
transferred) would minimize taxable gains, if any, to Excel that would otherwise
be recognized. Upon review of this and other relevant factors, the Excel Board
concluded that the benefits of the Distribution would more than offset any
negative tax consequences of the Distribution. See "--Material Federal Income
Tax Consequences of the Distribution."

DISTRIBUTION AGENT

The Distribution Agent is BankBoston, N.A., c/o Boston EquiServe, P.O. Box
1666, Boston, Massachusetts 02105, telephone: (800) 730-6001.

MANNER OF EFFECTING THE DISTRIBUTION

The general terms and conditions relating to the Distribution are set forth
in the Distribution Agreement (the "Distribution Agreement") that will be
executed on or prior to the Distribution Date among Excel, EDV and the Company.

Excel will effect the Distribution on the Distribution Date by delivering
all outstanding shares of Company Common Stock to the Distribution Agent for
distribution to the holders of record of Excel Common Stock as of the close of
business on the Record Date. The Distribution will be made on the basis of one
share of Company Common Stock for each share of Excel Common Stock held as of
the close of business on the Record Date. Based on shares of Excel
Common Stock on the Record Date, approximately shares of Company
Common Stock will be distributed to Excel stockholders. The shares of Company
Common Stock will be fully paid and nonassessable, and the holders thereof will
not be entitled to preemptive rights. See "DESCRIPTION OF THE COMPANY'S CAPITAL
STOCK." It is expected that certificates representing shares of the Company
Common Stock will be mailed to holders of Excel Common Stock as soon as
practicable after the Distribution Date.

HOLDERS OF EXCEL COMMON STOCK SHOULD NOT SEND CERTIFICATES TO THE COMPANY,
EXCEL OR THE DISTRIBUTION AGENT. THE DISTRIBUTION AGENT WILL MAIL THE STOCK
CERTIFICATES REPRESENTING SHARES OF COMPANY COMMON STOCK AS SOON AS PRACTICABLE
AFTER THE DISTRIBUTION DATE. EXCEL STOCK CERTIFICATES WILL CONTINUE TO REPRESENT
SHARES OF EXCEL COMMON STOCK AFTER THE DISTRIBUTION IN THE SAME AMOUNT SHOWN ON
THE CERTIFICATES.

No holder of Excel Common Stock will be required to pay any cash or other
consideration for the shares of Company Common Stock to be received in the
Distribution or to surrender or exchange shares of

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Excel Common Stock or to take any other action in order to receive the Company
Common Stock pursuant to the Distribution.

RESULTS OF THE DISTRIBUTION

After the Distribution, the Company will be a separate public company which
will own certain real properties, notes receivable and related assets and
liabilities. See "THE COMPANY" and "BUSINESS AND PROPERTIES." The number and
identity of the holders of Company Common Stock immediately after the
Distribution will be substantially the same as the number and identity of the
holders of Excel Common Stock on the Record Date. Immediately after the
Distribution, the Company expects to have approximately holders of
record of the Company Common Stock and approximately shares of the
Company Common Stock outstanding based on the number of Excel stockholders of
record on the Record Date, the outstanding shares of Excel Common Stock on the
Record Date and the distribution ratio of one share of Company Common Stock for
each share of Excel Common Stock. In addition, the Company has obtained
commitments to buy, effective upon consummation of the Distribution, (i)
9,195,224 shares of Company Common Stock in a private placement to certain of
the Company's officers, and (ii) shares of Series A Preferred Stock in a
private placement to certain "qualified institutional buyers" (as such term is
defined in Rule 144A under the Securities Act), which shares will be convertible
at any time into shares of Company Common Stock. See "CERTAIN TRANSACTIONS."

MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION

INTRODUCTION. The following is a summary of certain material Federal income
tax considerations associated with the Distribution prepared by Latham &
Watkins, tax counsel to Excel and the Company ("Tax Counsel"). This discussion
is based upon the laws, regulations and reported rulings and decisions in effect
as of the date of this Information Statement, all of which are subject to
change, retroactively or prospectively, and to possibly differing
interpretations. This discussion does not purport to deal with the Federal
income or other tax consequences applicable to all stockholders in light of
their particular investment circumstances or to all categories of stockholders,
some of whom may be subject to special rules (including, for example, insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States). No ruling on the Federal, state or local tax considerations relevant to
the operations of Excel or the Company or to the Distribution is being requested
from the IRS or from any other tax authority. Tax Counsel has rendered certain
opinions discussed herein, which Tax Counsel believes address the material
issues with respect to the Distribution and with respect to the qualification of
Excel as a REIT which are raised by the structure and currently anticipated
activities of the Company.

TAXATION OF EXCEL IN GENERAL. Excel has made an election to be treated as a
REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the "Code"), commencing with its taxable year ended December 31, 1987.
Excel believes that it was organized and has operated in such a manner so as to
qualify as a REIT, and Excel intends to continue to operate in such a manner,
but no assurance can be given that it has operated in a manner so as to qualify,
or will operate in a manner so as to continue to qualify, as a REIT.

The sections of the Code relating to qualifications and operation as a REIT
are highly technical and complex. In the opinion of Tax Counsel, with respect to
its taxable years ending on or after December 31, 1993, Excel has been organized
in conformity with the requirements for qualification as a REIT, and its
proposed manner of operation will enable it to meet the requirements for
qualification as a REIT. It must be emphasized that this opinion is based on
various assumptions relating to the organization and operation of Excel and is
conditioned upon certain representations made by Excel as to certain relevant
factual matters, including matters related to the organization, expected
operation, and assets of Excel. Moreover, continued qualification as a REIT will
depend upon Excel's ability to meet, through actual annual

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operating results, the distribution levels, stock ownership requirements and the
various qualification tests and other requirements imposed under the Code.
Accordingly, no assurance can be given that the actual stock ownership of Excel,
the mix of its assets, or the results of its operations for any particular
taxable year will satisfy such requirements.

TAXABLE INCOME RECOGNITION BY EXCEL AS A RESULT OF THE
DISTRIBUTION. Immediately prior to the Distribution, Excel will transfer to the
Company certain real properties, notes receivable and related assets and
liabilities held by Excel in exchange for Company Common Stock which the Company
will issue to Excel (the "Contribution"). See "BUSINESS AND PROPERTIES." Excel
will recognize gain as a result of the Contribution to the extent that the sum
of the fair market value of the Company Common Stock plus the aggregate amount
of the liabilities assumed by the Company exceeds Excel's adjusted basis in such
assets, determined as of the date of the Contribution. For book purposes, the
Company will transfer the assets at historical cost with no gain recognized.
Excel's tax basis in the Company Common Stock received in exchange for the
contributed assets will be equal to the fair market value of the Company Common
Stock.

Excel's taxable gain on the Distribution, if any, will be measured by the
extent to which, at the time of the Distribution, the fair market value of the
Company Common Stock distributed by Excel exceeds Excel's basis in such stock.
Because the Distribution will occur immediately after the Contribution, the
value of the Company Common Stock distributed should equal Excel's basis in such
stock, as a result of which Excel should recognize no additional gain on the
Distribution.

Because of the factual nature of the issue of the value of the Company
Common Stock received by Excel as a result of the Contribution and then
distributed by Excel, Tax Counsel is unable to render an opinion on the amount
of gain recognized by Excel as a result of these transactions. The amount of
gain, if any, will increase Excel's current or accumulated earnings and profits,
and thereby increase the portion of Excel's distributions that are treated as
made out of earnings and profits, and thus are dividends for federal income tax
purposes.

TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS OF EXCEL AS A RESULT OF THE
DISTRIBUTION. The Distribution will be treated as a distribution, the amount of
which equals the value of the Company Common Stock distributed plus any cash in
lieu of fractional shares, and Excel stockholders will receive a basis in
Company Common Stock equal to the value thereof at the time of the Distribution.
Because of the factual nature of the issue of the value of the Company Common
Stock distributed, Tax Counsel is unable to render an opinion on it. As long as
Excel qualifies as a REIT, distributions (including the Distribution) made to
Excel's taxable U.S. stockholders out of Excel's current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by such U.S. stockholders as ordinary income and, for corporate
stockholders, will not be eligible for the dividends received deduction.
Distributions in excess of current and accumulated earnings and profits will not
be taxable to a stockholder to the extent that they do not exceed the adjusted
basis of the stockholder's shares of Excel Common Stock, but rather will reduce
the adjusted basis of such shares. To the extent that distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
stockholder's shares of Excel Common Stock, such distributions will be included
in income as long-term capital gain if the shares have been held more than
eighteen months, mid-term capital gain if the shares have been held more than
one year but no more than eighteen months, or short-term capital gain if the
shares have been held for one year or less, assuming the shares are a capital
asset in the hands of the stockholder. In addition, any distribution declared by
Excel in October, November or December of any year payable to a stockholder of
record on a specified date in any such month shall be treated as both paid by
Excel and received by the stockholder on December 31 of such year, provided that
the distribution is actually paid by Excel during January of the following
calendar year. Stockholders may not include any net operating losses or capital
losses of Excel in their respective income tax returns. In general, any loss
upon a sale or exchange of shares by a stockholder who has held such shares for
six months or less (after applying certain holding period

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rules) will be treated as a long-term capital loss to the extent of
distributions from Excel required to be treated by such stockholder as long-term
capital gain.

TAXATION OF TAX-EXEMPT STOCKHOLDERS OF EXCEL AS A RESULT OF THE
DISTRIBUTION. Most tax-exempt employees' pension trusts are not subject to
Federal income tax except to the extent of their receipt of "unrelated business
taxable income" as defined in Section 512(a) of the Code ("UBTI"). The
Distribution to a stockholder that is a tax-exempt entity should not constitute
UBTI, provided that the tax-exempt entity has not financed the acquisition of
its shares of Excel Common Stock with "acquisition indebtedness" within the
meaning of the Code and such shares are not otherwise used in an unrelated trade
or business of the tax-exempt entity. In addition, certain pension trusts that
own more than 10.0% of a "pension-held REIT" must report a portion of the
dividends that they receive from such a REIT as UBTI. Excel has not been and
does not expect to be treated as a pension-held REIT for purposes of this rule.

TAXATION OF FOREIGN STOCKHOLDERS OF EXCEL AS A RESULT OF THE
DISTRIBUTION. The rules governing United States Federal income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships and
other foreign stockholders (collectively, "Non-U.S. Stockholders") are complex,
and no attempt will be made in this Information Statement to provide more than a
summary of such rules. Non-U.S. Stockholders should consult with their own tax
advisors to determine the impact of Federal, state and local tax laws with
regard to the Distribution, including any reporting requirements. In general, as
is the case with domestic taxable stockholders of Excel, the Distribution is
treated as a distribution whose amount equals the value of the Company Common
Stock distributed plus any cash in lieu of fractional shares, and Excel
stockholders will receive a basis in Company Common Stock equal to the fair
market value thereof at the time of the Distribution.

Distributions that are not attributable to gain from sales or exchanges by
Excel of United States real property interests and not designated by Excel as
capital gain dividends will be treated as dividends of ordinary income to the
extent that they are made out of current and accumulated earnings and profits of
Excel. Such distributions ordinarily will be subject to a withholding tax equal
to 30.0% of the gross amount of the distribution, unless an applicable tax
treaty reduces or eliminates that tax. Excel expects to withhold U.S. income tax
at the rate of 30.0% on the gross amount of any such distribution made to a
Non-U.S. Stockholder unless (i) a lower treaty rate applies and the Non-U.S.
Stockholder has filed the required IRS Form 1001 with Excel (or, as discussed
below, such other certifications as shall be required under the Final Treasury
Regulations to establish that the Non-U.S. Stockholder is entitled to claim the
benefits of such reduced treaty rate), or (ii) the Non-U.S. Stockholder files an
IRS Form 4224 with Excel claiming that the distribution is effectively connected
with the Non-U.S. Stockholder's conduct of a U.S. trade or business (or, as
discussed below, such other certifications as shall be required under the Final
Treasury Regulations to establish such withholding tax exemption). Distributions
in excess of Excel's current and accumulated earnings and profits will be
subject to a 10.0% withholding requirement but will not be taxable to a
stockholder to the extent that such distributions do not exceed the adjusted
basis of the stockholder's shares of Excel Common Stock, but rather will reduce
the adjusted basis of such shares. To the extent that distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a Non-
U.S. Stockholder's shares, such distributions will give rise to tax liability if
the Non-U.S. Stockholder would otherwise be subject to tax on any gain from the
sale or disposition of the Excel Common Stock. Any portion of the Distribution
which is treated as a capital gain dividend and is not attributable to a
disposition by Excel of a United States real property interest shall be subject
to a similar rule. Provided that Excel is a "domestically controlled REIT" for
federal income tax purposes, a Non-U.S. Stockholder would be subject to taxation
on gain from a sale or disposition of Excel Common Stock only if (i) the
investment in the Excel Common Stock were treated as effectively connected with
such Non-U.S. Stockholder's U.S. trade or business, in which case the Non-U.S.
Stockholder would be subject to the same treatment as U.S. shareholders with
respect to such gain, or (ii) the Non-U.S. Stockholder is a nonresident alien
individual who was present in the United States for 183 days or more during the
taxable year of the sale or disposition and either the individual has a "tax
home" in the United States or the gain is

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attributable to an office or other fixed place of business maintained by the
individual in the United States, in which case the gain will be subject to a
30.0% tax. The Company believes that Excel is and currently expects to continue
to be a "domestically controlled REIT" for federal income tax purposes.

If it cannot be determined at the time a distribution is made whether or not
such distribution will be in excess of current and accumulated earnings and
profits, the distributions would be subject to withholding at the same rate as
dividends. However, a Non-U.S. Stockholder may seek a refund of such amounts
from the IRS if it is subsequently determined that such distribution was, in
fact, in excess of Excel's current and accumulated earnings and profits.

The Company anticipates that a portion of the Distribution will be treated
as attributable to Excel's disposition of a United States real property
interest. To the extent that a portion of the Distribution were to be treated as
attributable to the disposition of a United States real property interest, a
non-U.S. Stockholder would be subject to tax on such portion as though it were
gain that was effectively connected with a United States trade or business of
such Non-U.S. Stockholder. Thus, Non-U.S. Stockholders would be taxed on such
portions of the Distribution at the normal capital gain rates applicable to U.S.
shareholders. Excel is required under applicable Treasury Regulations to
withhold 35.0% of any distribution to a Non-U.S. Stockholder that could be
designated by Excel as a capital gain dividend. The amount so withheld is
creditable against the Non-U.S. Stockholder's U.S. tax liability.

Amounts required to be withheld from payments to Non-U.S. Stockholders will
be collected by converting a portion of the Company Common Stock to be
distributed into cash.

ALL EXCEL STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE
APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.

QUOTATION AND TRADING OF COMPANY COMMON STOCK; DIVIDEND POLICY

There is not currently a public market for the Company Common Stock. Prices
at which the Company Common Stock may trade prior to the Distribution on a
"when-issued" basis or after the Distribution cannot be predicted. Until the
Company Common Stock is fully distributed and an orderly market develops, the
prices at which trading in such stock occurs may fluctuate significantly. The
prices at which the Company Common Stock trades will be determined by the
marketplace and may be influenced by many factors, including, among others, the
success of the Company's business, the depth and liquidity of the market for the
Company Common Stock, investor perception of the Company and its assets, the
Company's dividend policy, and general economic and market conditions. Such
prices also may be affected by certain provisions of the Company Certificate and
the Company Bylaws, as each will be in effect following the Distribution, which
may have an anti-takeover effect. See "RISK FACTORS--Absence of Prior Trading
Market for Company Common Stock; Potential Volatility" and "LEGACY CERTIFICATE
OF INCORPORATION AND BYLAWS."

The Company initially intends to apply to have the Company Common Stock
approved for quotation and trading on the OTC Bulletin Board. Immediately after
the Distribution, the Company expects to have approximately
stockholders of record based upon the number of stockholders of record of Excel
on the Record Date. For certain information regarding options to purchase the
Company Common Stock that will be outstanding after the Distribution, see
"RELATIONSHIP BETWEEN LEGACY AND EXCEL AFTER THE DISTRIBUTION--Employee Benefits
Allocation Agreement" and "MANAGEMENT--Legacy Stock Option Plan."

The Company presently intends to retain future earnings to finance the
growth and development of its business; and, therefore, the Company does not
currently anticipate paying any cash dividends. Any future determination
relating to dividend policy will be made at the discretion of the Company Board.
Such determinations will depend on a number of factors, including the future
earnings, capital requirements,

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financial condition and prospects of the Company, possible loan or financing
covenant restrictions, and such other factors as the Company Board may deem
relevant. See "RISK FACTORS--Dividend Policy."

The Company initially will consist of certain real properties, notes
receivable and related assets and liabilities, as described in "BUSINESS AND
PROPERTIES." Nothing herein should be construed to suggest that the trading
price of Excel Common Stock at any point in time may be used as a substitute for
the trading price of Company Common Stock. No assurance can be given that the
Company Common Stock will trade at a price per share reflecting the earnings per
share or other multiple, or other attributes, of Excel. See "RISK
FACTORS--Absence of Prior Trading Market for Company Common Stock; Potential
Volatility."

It is the Company's belief that the Company Common Stock distributed to
Excel's stockholders in the Distribution will be freely transferable, except for
securities received by persons who may be deemed to be "affiliates" of Excel
within the meaning of Rule 144 under the Securities Act, in which case such
persons may not publicly offer or sell the Company Common Stock received in
connection with the Distribution except pursuant to a registration statement
under the Securities Act or pursuant to Rule 144. There can be no assurance that
the Commission will not take a contrary view, and no ruling from the Commission
has been or will be sought. See "RISK FACTORS--Shares Eligible for Future Sale."

CONDITIONS; TERMINATION

The Excel Board has conditioned the Distribution upon, among other things,
(i) the transfer of assets and liabilities contemplated by the Distribution
Agreement having been consummated in all material respects, (ii) the Company
Board having been elected by Excel as sole stockholder of the Company, and the
Company Certificate and the Company Bylaws, as each will be in effect after the
Distribution, having been adopted and being in effect, (iii) the Registration
Statement on Form 10 with respect to the Company Common Stock having become
effective under the Exchange Act, and (iv) receipt of any necessary consents to
the Distribution from third parties, except for those the failure of which to
obtain would not have a material adverse effect on the Company or Excel. The
Company believes that there are no third-party consents which if not obtained
would have a material adverse effect on the Company, Excel or the Distribution.
Any of the conditions to the Distribution may be waived in the discretion of the
Excel Board. Even if all of the above conditions are satisfied, the Excel Board
has reserved the right to abandon, defer or modify the Distribution or the other
elements of the Distribution at any time prior to the Distribution Date;
however, the Excel Board will not waive any of the conditions to the
Distribution or make any changes in the terms of the Distribution unless the
Excel Board determines that such changes would not be materially adverse to the
Excel stockholders. See "RELATIONSHIP BETWEEN LEGACY AND EXCEL AFTER THE
DISTRIBUTION--Distribution Agreement."

REASONS FOR FURNISHING THE INFORMATION STATEMENT

This Information Statement is being furnished by Excel solely to provide
information to Excel stockholders who will receive Company Common Stock in the
Distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of Excel or the Company. The
information contained in this Information Statement is believed by Excel and the
Company to be accurate as of the date set forth on the cover of this Information
Statement. Changes may occur after that date, and neither the Company nor Excel
will update the information except in the normal course of their respective
public disclosure practices.

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RISK FACTORS

This Information Statement contains forward-looking statements within the
meaning of the Securities Act. Discussions containing such forward-looking
statements may be found throughout this Information Statement, including without
limitation in the materials set forth under "SUMMARY"; "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"; "THE COMPANY"
and "BUSINESS AND PROPERTIES." Actual events or results may differ materially
from those discussed in the forward-looking statements as a result of various
factors, including without limitation the risk factors set forth below and the
matters set forth in this Information Statement generally.

RECENTLY FORMED ENTITY; LACK OF INDEPENDENT OPERATING HISTORY

It should be noted that the Company is a recently-formed entity with no
prior operating history. There can be no assurance that the Company will not
encounter financial, managerial or other difficulties as a result of its lack of
operating history or inability to rely on the financial and other resources of
Excel. Currently the Company has no external source of financing and the Company
has not received any commitment with respect to any funds needed in the future.
The Company expects to be able to access capital markets or to seek other
financing, but there can be no assurance that it will be able to do so at all or
in amounts or on terms acceptable to the Company. The Company also expects to
establish a working line of credit for the acquisition and development of
properties, but there can be no assurance that such a line will be obtained at
all or in amounts or on terms acceptable to the Company.

POSSIBLE CONFLICTS WITH EXCEL AFTER THE DISTRIBUTION

As of the Distribution Date, the Company Board will consist of Gary B.
Sabin, who is currently Chairman, President and Chief Executive Officer of Excel
and who will serve in the same positions with the Company, Richard B. Muir, who
is currently Executive Vice President and Secretary of Excel and who will serve
in the same positions with the Company, John H. Wilmot and Robert E. Parsons,
Jr., who are currently directors of Excel, and and
, who are not affiliated with Excel. As of the Distribution
Date, the executive officers of the Company will include Mr. Sabin, Mr. Muir,
Graham R. Bullick, who is currently Senior Vice President--Capital Markets of
Excel and who will serve in the same position with the Company, Ronald H. Sabin,
who is currently Senior Vice President--Asset Management of Excel and who will
serve in the same position with the Company, David A. Lund, who is currently
Chief Financial Officer of Excel and who will serve in the same position with
the Company, S. Eric Ottesen, who is currently Senior Vice President, General
Counsel and Assistant Secretary of Excel and who will serve in the same
positions with the Company, and Mark T. Burton, who is currently Senior Vice
President--Acquisitions of Excel and who will serve in the same position with
the Company. See "MANAGEMENT." None of the members of management of the Company
is committed to spending a particular amount of time on the Company's affairs,
nor will any of them devote his full time to the Company. As a result of these
dual roles, there is the potential for a lack of management attention to the
Company which could have an adverse effect on the Company. The members of senior
management of the Company will not receive a salary from the Company, but
instead will receive payment from Excel based upon the amount of time spent on
Company matters pursuant to the Transitional Services Agreement (as defined
below). See "RELATIONSHIP BETWEEN LEGACY AND EXCEL AFTER THE
DISTRIBUTION--Transitional Services Agreement."

The Company and Excel have entered into certain agreements providing for (i)
the orderly separation of the Company and Excel and the making of the
Distribution, (ii) the sharing of certain facilities and services, and (iii) the
allocation of certain tax and other liabilities. Because the management of both
the Company and Excel will be largely the same following the Distribution,
conflicts may arise with respect to the operation and effect of these agreements
and relationships which could have an adverse effect on the Company if not
properly resolved. More specifically, members of the Board and senior management
of the

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Company and Excel may be presented with conflicts of interest with respect to
certain matters affecting the Company and Excel, such as the determination of
which company may take advantage of potential business opportunities, decisions
concerning the business focus of each company (including decisions concerning
the types of properties and geographic locations in which such companies make
investments), potential competition between the business activities conducted,
or sought to be conducted, by such companies (including competition for
properties and tenants), possible corporate transactions (such as acquisitions),
and other strategic decisions affecting the future of such companies. Conflicts
also may arise with respect to the restriction on the Company's right to engage
in certain activities or make certain investments unless Excel was first offered
the opportunity and declined to pursue such activities or investments (as
described below). In this regard, the Company and Excel will adopt appropriate
policies and procedures on or prior to the Distribution Date to be followed by
the Board of Directors of each company to address potential conflicts. Such
procedures include requiring the persons serving as directors of both companies
to abstain from voting as directors with respect to matters that present a
significant conflict of interest between the companies. In addition, the Company
Certificate contains a specific purpose clause which identifies at the outset
which types of opportunities will be pursued by the Company. This clause
provides that the Company's purpose includes performing the Intercompany
Agreement, which prohibits the Company from engaging in certain activities or
making certain investments unless Excel was first offered the opportunity and
declined to pursue such activities or investments. See "RELATIONSHIP BETWEEN
LEGACY AND EXCEL AFTER THE DISTRIBUTION--Policies and Procedures for Addressing
Conflicts" and "THE COMPANY--Intercompany Agreement."

FAILURE OF EXCEL TO QUALIFY AS A REIT

The Company and Excel will enter into an Intercompany agreement on or prior
to the Distribution Date to provide each other with rights to participate in
certain transactions. See "THE COMPANY-- Intercompany Agreement." The
Intercompany Agreement prohibits the Company from engaging in certain activities
or making certain investments unless Excel was first offered the opportunity and
declined to pursue such activities and investments. As a REIT, Excel is required
to focus principally on investment in certain real estate assets and is
prevented from owning certain assets and conducting certain activities that
would be inconsistent with its status as a REIT. If Excel in the future should
fail to qualify as a REIT, it would thereafter have the ability to participate
in a broader range of investments and activities that are presented to it by the
Company under the Intercompany Agreement. As a result, Excel's ability to engage
in non-REIT activities could (i) significantly restrict the opportunities the
Company may pursue, and/or (ii) allow Excel to compete with the Company for
non-REIT investments. Accordingly, if Excel should fail to qualify as a REIT,
that failure could have a material adverse effect on the Company.

RELIANCE ON MAJOR TENANTS

As of the Distribution Date, the Company's largest tenants will be AMC,
Wal-Mart and Lowe's, which will account for approximately 45.2%, 34.2% and 11.1%
of the Company's total revenue as of such date, respectively. See "BUSINESS AND
PROPERTIES--Principal Tenants." The financial position of the Company may be
adversely affected by financial difficulties experienced by any of such tenants,
or any other major tenant of the Company, including a bankruptcy, insolvency or
general downturn in the business of any such tenant, or in the event any such
tenant does not renew its leases as they expire.

CONTROL BY EXECUTIVE OFFICERS AND DIRECTORS

Based solely on their ownership of Excel Common Stock and options to acquire
Excel Common Stock as of the Record Date, the executive officers and directors
of the Company will beneficially own an aggregate of shares, or
approximately %, of the outstanding Company Common Stock immediately
following the Distribution. In addition, certain officers of the Company (i)
have agreed to purchase, effective upon consummation of the Distribution,
9,195,224 shares of Company Common Stock in a private placement, and (ii) will
be granted options to acquire 3,100,000 shares of Company Common Stock

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under the Legacy Stock Option Plan upon consummation of the Distribution. As a
result, the executive officers and directors of the Company will beneficially
own or have the right to acquire an aggregate of shares, or
approximately %, of the outstanding Company Common Stock immediately
following the Distribution. See "MANAGEMENT--Legacy Stock Option Plan"; "CERTAIN
TRANSACTIONS" and "SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT." Such persons will have substantial influence over the Company and
on the outcome of matters submitted to the Company's stockholders for approval.
In addition, such ownership could discourage acquisition of Company Common Stock
by potential investors, and could have an anti-takeover effect, possibly
depressing the trading price of the Company Common Stock.

TAX CONSEQUENCES OF THE DISTRIBUTION

Excel will recognize gain as a result of the transfer of certain properties
and assets to the Company in exchange for Company Common Stock. Such gain will
be the sum of (i) the excess of the fair market value of the Company Common
Stock over Excel's adjusted basis in such assets, and (ii) the aggregate amount
of liabilities assumed by the Company. Excel will recognize gain upon the
Distribution equal to the excess, if any, of the fair market value of the
Company Common Stock on the Distribution Date over Excel's tax basis in such
stock. Because the Distribution will occur immediately after the transfer of
assets to the Company, the value of the Company Common Stock distributed should
equal Excel's basis in such stock, as a result of which Excel should recognize
no additional gain on the Distribution. Because of the factual nature of the
issue of the value of the Company Common Stock received by Excel as a result of
the transfer of assets and then distributed by Excel, Tax Counsel is unable to
render an opinion on the amount of gain recognized as a result of these
transactions. For a more detailed explanation, see "THE DISTRIBUTION--Material
Federal Income Tax Consequences of the Distribution."

The Distribution will be treated as a distribution, the amount of which
equals the value of the Company Common Stock distributed plus any cash in lieu
of fractional shares, and Excel stockholders will receive a basis in Company
Common Stock equal to the value thereof at the time of the Distribution. Because
of the factual nature of the issue of the value of the Company Common Stock
distributed, Tax Counsel is unable to render an opinion on it. The Distribution
will be taxable to Excel stockholders to the same extent as any other
distribution made by Excel to its stockholders. As long as Excel qualifies as a
REIT, distributions (including the Distribution) made to Excel's taxable U.S.
stockholders out of Excel's current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taxable as ordinary income and,
for corporate stockholders, will not be eligible for the dividends received
deduction. Distributions in excess of current and accumulated earnings and
profits will not be taxable to Excel's taxable U.S. stockholders to the extent
they do not exceed the adjusted basis of the stockholder's shares of Excel
Common Stock, but rather will reduce the adjusted basis of such shares. To the
extent that distributions in excess of current and accumulated earnings and
profits exceed the adjusted basis of the stockholder's shares of Excel Common
Stock, such distributions generally will be taxable as capital gain. For a more
detailed explanation, see "THE DISTRIBUTION--Material Federal Income Tax
Consequences of the Distribution."

ABSENCE OF FUTURE FUNDING COMMITMENTS; NEED FOR FUTURE CAPITAL

The success of the Company's business strategy is dependent upon being able
to obtain significant amounts of equity capital and proceeds from borrowings on
terms financially advantageous to the Company. Currently the Company has no
external source of financing and the Company has not received any commitment
with respect to any funds needed in the future. The Company expects to be able
to access capital markets or to seek other financing, but there can be no
assurance that it will be able to do so at all or in amounts or on terms
acceptable to the Company. Failure to obtain such financing could result in the
delay or abandonment of some or all of the Company's acquisition and development
plans and could have a material adverse effect on the Company. In the absence of
such financing, there can be no assurance that the Company will have sufficient
working capital to finance future acquisitions or to pursue additional

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opportunities. Excel currently is not obligated to provide any additional funds
to the Company or to assist it in obtaining additional financing.

DILUTION

The Company may from time to time raise additional capital from the issuance
and sale of equity securities. Any such issuances may significantly dilute the
interests of the existing holders of Company securities, including the Company
Common Stock.

ABSENCE OF PRIOR TRADING MARKET FOR COMPANY COMMON STOCK; POTENTIAL VOLATILITY

There is no existing market for the Company Common Stock. Although the
Company initially intends to apply for quotation and trading of the Company
Common Stock on the OTC Bulletin Board, no assurance can be given that an active
trading market for the Company Common Stock will develop following the
Distribution or, if developed, that any such market will be sustained. In the
absence of a public trading market, an investor may be unable to liquidate his
investment in the Company. Prices at which the Company Common Stock may trade
cannot be predicted. Nothing herein should be construed to suggest that the
trading price of Excel Common Stock at any point in time may be used as a
substitute for the trading price of Company Common Stock. The prices at which
the Company Common Stock trades will be determined by the marketplace and may be
influenced by many factors, including, among others, the success of the
Company's business, the depth and liquidity of the market for the Company Common
Stock, investor perception of the Company and its assets, the Company's dividend
policy, and general economic and market conditions. The depth and liquidity of
the market for the Company Common Stock may be affected by the aggregate
beneficial ownership by executive officers and directors of the Company of
approximately % of the Company Common Stock immediately following the
Distribution. See "--Control by Executive Officers and Directors." The prices at
which the Company Common Stock trades also may be affected by certain provisions
of the Company Certificate and the Company Bylaws, as each will be in effect
following the Distribution, which may have an anti-takeover effect. See
"--Certain Anti-Takeover Features."

SHARES ELIGIBLE FOR FUTURE SALE

The approximately shares of Company Common Stock distributed to
Excel stockholders in the Distribution will be freely transferable, except for
the shares distributed to persons who may be deemed to be "affiliates" of the
Company under the Securities Act. Such affiliates will be permitted to sell
their shares of Company Common Stock pursuant to Rule 144 under the Securities
Act beginning 90 days after the Distribution, subject to certain volume
limitations, manner of sale limitations, notice requirements and the
availability of current public information about the Company. In addition,
immediately following the Distribution, (i) 9,195,224 shares of Company Common
Stock will be purchased by certain of the Company's officers in a private
placement, (ii) shares of Series A Preferred Stock will be purchased by
certain "qualified institutional buyers" (as such term is defined in Rule 144A
under the Securities Act) in a private placement, which shares will be
convertible at any time into shares of Company Common Stock, and (iii) options
to purchase 3,100,000 shares of Company Common Stock will be granted to the
Company's executive officers under the 1998 Stock Option Plan of Excel Legacy
Corporation (the "Legacy Stock Option Plan"). See "MANAGEMENT--Legacy Stock
Option Plan" and "CERTAIN TRANSACTIONS." Shares of Company Common Stock issued
in (or pursuant to conversion rights granted in) the private placements may be
sold only pursuant to an effective registration statement under the Securities
Act or an exemption from the registration requirements of the Securities Act,
such as the exemption afforded by Rule 144. In this regard, the Company will
grant the purchasers of the Series A Preferred Stock certain registration
rights. See "DESCRIPTION OF THE COMPANY'S CAPITAL STOCK--Registration Rights."
Shares issued pursuant to the exercise of options granted under the Legacy Stock
Option Plan will be freely transferable without restriction, subject, in the
case of sales by affiliates, to compliance with Rule 144.

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The Company is unable to estimate the number of shares that may be sold in
the future by its stockholders or the effect, if any, that sales of shares by
such stockholders will have on the market price of the Company Common Stock
prevailing from time to time. Sales of substantial amounts of Company Common
Stock, or the prospect of such sales, could adversely affect the market price of
the Company Common Stock.

POTENTIAL ADVERSE EFFECTS ON EXCEL COMMON STOCK OF DISTRIBUTION

After the Distribution, the Excel Common Stock will continue to be traded on
the New York Stock Exchange. As a result of the Distribution, the trading price
of Excel Common Stock is expected to be lower than the trading price of Excel
Common Stock prior to the Distribution to reflect the value of the assets
transferred to the Company. The combined trading prices of Excel Common Stock
and Company Common Stock after the Distribution may be less than, equal to or
greater than the trading prices of Excel Common Stock prior to the Distribution.
In addition, until the market has fully analyzed the operations of Excel without
the Company's assets, the price at which the Excel Common Stock trades may
fluctuate significantly.

DIFFICULTY OF LOCATING SUITABLE INVESTMENTS; COMPETITION

Identifying, completing and realizing on real estate investments has from
time to time been highly competitive, and involves a high degree of uncertainty.
The Company will be competing for investments with many public and private real
estate investment vehicles, including financial institutions (such as mortgage
banks, pension funds and REITs) and other institutional investors, as well as
individuals. There can be no assurance that the Company will be able to locate
and complete investments which satisfy the Company's rate of return objective or
realize upon their value or that it will be able to fully invest its available
capital.

Many of those with whom the Company will compete for investments are far
larger than the Company, may have greater financial resources than the Company
and may have management personnel with more experience than the officers of the
Company.

RISKS OF ACQUISITION, DEVELOPMENT, CONSTRUCTION AND RENOVATION ACTIVITIES

PROBLEMS ASSOCIATED WITH THE ACQUISITION OF REAL PROPERTY. The Company
intends to acquire existing properties to the extent that they can be acquired
on advantageous terms and meet the Company's investment criteria. Acquisitions
of properties entail general investment risks associated with any real estate
investment, including the risk that investments will fail to perform as
expected, that estimates of the cost of improvements to bring an acquired
property up to standards established for the intended market position may prove
inaccurate and the occupancy rates and rents achieved may be less than
anticipated.

PROBLEMS ASSOCIATED WITH THE DEVELOPMENT, CONSTRUCTION AND RENOVATION OF
REAL PROPERTY. The Company also intends to pursue the selective development,
construction and renovation of properties for its own account or the account of,
or through, entities in which it owns an equity interest as opportunities arise,
including without limitation long-term, higher-risk, mixed-use retail
entertainment projects. Risks associated with the Company's development,
construction and renovation activities include the risks that: the Company may
abandon development opportunities after expending resources to determine
feasibility; construction and renovation costs of a project may exceed original
estimates; occupancy rates and rents at a newly completed property may not be
sufficient to make the property profitable; and development, construction,
renovation and lease-up may not be completed on schedule (including risks beyond
the control of the Company, such as weather or labor conditions or material
shortages) resulting in increased debt service expense and construction costs.
Development, construction and renovation activities also are subject to risks
relating to the inability to obtain, or delays in obtaining, all necessary
zoning, land-use, building, occupancy and other required governmental permits
and authorizations. These risks could result in substantial unanticipated delays
or expenses and, under certain circumstances, could prevent completion

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of development, construction and renovation activities once undertaken, any of
which could adversely affect the financial condition and results of operations
of the Company. Properties under development or acquired for development may
generate little or no cash flow from the date of acquisition through the date of
completion of development and may experience operating deficits after the date
of completion. In addition, new development and renovation activities,
regardless of whether or not they are ultimately successful, typically require a
substantial portion of management's time and attention.

Any properties developed and renovated by the Company will be subject to the
risks associated with the ownership and operation of real estate described
elsewhere in this section entitled "RISK FACTORS."

OPERATING RISKS

If the properties of the Company, the properties of those entities in which
it invests or the properties of those entities to which it will lend
(collectively, the "Properties") do not generate revenue sufficient to meet
operating expenses, including debt service and capital expenditures, the
financial condition and results of operations of the Company may be adversely
affected. The Properties are subject to operating risks common to the particular
property type, any and all of which may adversely affect occupancy or rental
rates. Such properties are subject to increases in operating expenses such as
cleaning; electricity; heating, ventilation and air-conditioning; elevator
repair and maintenance; insurance and administrative costs; and other general
costs associated with security, landscaping, repairs and maintenance. The
Company's financial condition and results of operations also may be adversely
affected by a number of other factors, including international and domestic
general economic climate and local real estate conditions (such as oversupply of
or reduced demand for space and changes in market rental rates); the perceptions
of prospective tenants of the safety, convenience and attractiveness of the
Properties; the ability of the owner to provide adequate management, maintenance
and insurance; energy and supply shortages; the ability to collect on a timely
basis all rent from tenants and interest from borrowers; the expense of
periodically renovating, repairing and reletting spaces; and increasing
operating costs (including real estate taxes and utilities) which may not be
passed through to tenants. Certain significant expenditures associated with
investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental revenues from the investment. While commercial
tenants are often obligated to pay a portion of these escalating costs, there
can be no assurance that they will agree to pay such costs or that the portion
that they agree to pay will fully cover such costs. If operating expenses
increase, the local rental market may limit the extent to which rents may be
increased to meet increased expenses without decreasing occupancy rates. To the
extent rents cannot be increased or costs controlled, the cash flow of the
Company and its financial condition may be adversely affected.

DEPENDENCE ON RENTAL INCOME FROM REAL PROPERTY

The Company's cash flow, results of operations and value of its assets would
be adversely affected if a significant number of tenants of the Properties
failed to meet their lease obligations or if the Company or the owner of a
Property were unable to lease a significant amount of space on economically
favorable terms. In the event of a default by a lessee, the owner may experience
delays in enforcing its rights as lessor and may incur substantial costs in
protecting its investment. The bankruptcy or insolvency of a major tenant may
have an adverse effect on a property. At any time, a tenant also may seek
protection under the bankruptcy laws, which could result in rejection and
termination of such tenant's lease and thereby cause a reduction in the cash
flow of the property. If a tenant rejects its lease, the owner's claim for
breach of the lease would (absent collateral securing the claim) be treated as a
general unsecured claim. Generally, the amount of the claim would be capped at
the amount owed for unpaid pre-petition lease payments unrelated to the
rejection, plus the greater of one year's lease payments or 15.0% of the
remaining lease payments payable under the lease (but not to exceed the amount
of three years' lease payments). No assurance can be given that the Properties
will not experience significant tenant defaults in the future.

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ADVERSE CONSEQUENCES OF DEBT FINANCING

LEVERAGE. Some of the Company's real estate equity investments may utilize
a leveraged capital structure, in which case a third party lender would be
entitled to cash flow generated by such investments prior to the Company
receiving a return. As a result of such leverage, the Company would be subject
to the risks normally associated with debt financing, including the risk that
cash flow from operations and investments will be insufficient to meet required
payments of principal and interest, the risk that existing debt (which in most
cases will not have been fully amortized at maturity) will not be able to be
refinanced or that the terms of such refinancings will not be as favorable to
the Company, and the risk that necessary capital expenditures for such purposes
as renovations and other improvements will not be able to be financed on
favorable terms or at all. While such leverage may increase returns or the funds
available for investment by the Company, it also will increase the risk of loss
on a leveraged investment. If the Company defaults on secured indebtedness, the
lender may foreclose and the Company could lose its entire investment in the
security for such loan. Because the Company may engage in portfolio financings
where several investments are cross-collateralized, multiple investments may be
subject to the risk of loss. As a result, the Company could lose its interests
in performing investments in the event such investments are cross-collateralized
with poorly performing or nonperforming investments. In addition, recourse debt,
which the Company reserves the right to obtain, may subject other assets of the
Company to risk of loss.

EXISTING DEBT MATURITIES; FORECLOSURES. The Company anticipates that only a
portion of the principal of the Company's indebtedness outstanding from time to
time will be repaid prior to maturity. However, the Company may not have
sufficient funds to repay such indebtedness at maturity; it may therefore be
necessary for the Company to refinance debt through additional debt financing or
equity offerings. If the Company is unable to refinance this indebtedness on
acceptable terms, the Company may be forced to dispose of properties or other
assets upon disadvantageous terms, which could result in losses to the Company
and adversely affect the amount of cash available for further investment.

RISK OF RISING INTEREST RATES. The Company may incur indebtedness in the
future that bears interest at a variable rate or may be required to refinance
its debt at higher rates. Accordingly, increases in interest rates could
increase the Company's interest expense and adversely affect the financial
condition and results of operations of the Company.

RESTRICTIVE COVENANTS. Various credit facilities or other debt obligations
may require the Company to comply with a number of financial and other covenants
on an ongoing basis. Failure to comply with such covenants may limit the
Company's ability to borrow funds or may cause a default under its then-existing
indebtedness.

NO LIMITATION ON DEBT. The organizational documents of the Company do not
contain any limitation on the amount of indebtedness the Company may incur. The
Company also has the ability to use a more highly leveraged business strategy
than typically used by REITs. Accordingly, the Company could become highly
leveraged, resulting in an increase in debt service that could increase the risk
of default on the Company's indebtedness.

RISKS ASSOCIATED WITH EQUITY INVESTMENTS IN AND WITH THIRD PARTIES; POTENTIAL
LACK OF CONTROL OF MANAGEMENT

The Company may invest in shares of REITs or other entities that invest in
real estate assets, including debt instruments and equity interests. In such
cases, the Company will be relying on the assets, investments and management of
the REIT or other entity in which it is investing. Such entities and their
properties will be subject to the other risks affecting the ownership and
operation of real estate and investment in debt set forth in this section
entitled "RISK FACTORS."

The Company also may co-invest with third parties through partnerships,
joint ventures or other entities, acquiring non-controlling interests in or
sharing responsibility for managing the affairs of a

23
<PAGE>
property, partnership, joint venture or other entity and, therefore, will not be
in a position to exercise sole decision-making authority regarding the property,
partnership, joint venture or other entity.

Investments in partnerships, joint ventures or other entities may, under
certain circumstances, involve risks not present were a third party not
involved, including the possibility that the Company's partners or co-venturers
might become bankrupt or otherwise fail to fund their share of required capital
contributions, that such partners or co-venturers might at any time have
economic or other business interests or goals which are inconsistent with the
business interests or goals of the Company, and that such partners or
co-venturers may be in a position to take action contrary to the instructions or
the requests of the Company and contrary to the Company's policies or
objectives. Such investments also may have the potential risk of impasse on
decisions, such as a sale, because neither the Company nor the partner or
co-venturer would have full control over the partnership or joint venture.
Consequently, actions by such partner or co-venturer might result in subjecting
properties owned by the partnership or joint venture to additional risk. In
addition, the Company may in certain circumstances be liable for the actions of
its third-party partners or co-venturers.

ILLIQUIDITY OF REAL ESTATE INVESTMENTS

Equity and debt investments in real estate may be relatively illiquid. Such
illiquidity limits the ability of the Company to modify its portfolio in
response to changes in economic or other conditions and may have a material
adverse effect on the Company. Illiquidity may result from the absence of an
established market for the investments as well as legal or contractual
restrictions on their resale by the Company.

DISADVANTAGES OF INVESTMENTS IN DEBT INSTRUMENTS

The Company may originate debt investments and may acquire performing or
nonperforming debt investments. In general, debt instruments carry the risk that
borrowers may not be able to make debt service payments or to pay principal when
due, the risk that the value of any collateral may be less than the amounts
owed, the risk that interest rates payable on the debt instruments may be lower
than the Company's cost of funds, and the risk that the collateral may be
mismanaged or otherwise decline in value during periods in which the Company is
seeking to obtain control of the underlying real estate. The Company is also
dependent on the ability of the borrowers to operate successfully their
properties. Such borrowers and their properties will be subject to the other
risks affecting the ownership and operation of real estate set forth in this
section entitled "RISK FACTORS." Some of the loans may be structured so that all
or a substantial portion of the principal will not be paid until maturity, which
increases the risk of default at that time.

It is anticipated that a substantial portion of the debt in which the
Company invests will not be rated by any nationally-recognized rating agency.
Generally, the value of unrated classes is more subject to fluctuation due to
economic conditions than rated classes. The Company's acquisition of credit
supported classes of securitizations (which generally are expected to be first
loss classes) which are unrated at the time of acquisition and which have lower
ratings may increase the risk of nonpayment or of a significant delay in
payments on these classes. Should rated assets be downgraded, it may adversely
affect their value and may adversely affect the Company.

DISADVANTAGES OF INVESTMENTS IN MORTGAGE LOANS

To the extent the Company invests in mortgage loans, such mortgage loans may
or may not be recourse obligations of the borrower and generally will not be
insured or guaranteed by governmental agencies or otherwise. In the event of a
default under such obligations, the Company may have to foreclose its mortgage
or protect its interest by acquiring title to a property and thereafter making
substantial improvements or repairs in order to maximize the property's
investment potential. Borrowers may contest enforcement of foreclosure or other
remedies, seek bankruptcy protection against such enforcement and/ or bring
claims for lender liability in response to actions to enforce mortgage
obligations. Relatively high

24
<PAGE>

"loan-to-value" ratios and declines in the value of the property may prevent the
Company from realizing an amount equal to its mortgage loan upon foreclosure.

The Company may participate in loans originated by other financing
institutions. As a participant, the Company may not have the sole authority to
declare a default under the mortgage or to control the property or any
foreclosure.

Any investments in junior mortgage loans which are subordinate to liens of
senior mortgages would involve additional risks, including the lack of control
over the collateral and any related foreclosure proceeding. In the event of a
default on a senior mortgage, the Company may make payments to prevent
foreclosure on the senior mortgage without necessarily improving the Company's
position with respect to the subject real property. In such event, the Company
would be entitled to share in the proceeds only after satisfaction of the
amounts due to the holder of the senior mortgage.

POTENTIAL LOSSES ON INVESTMENTS IN COMMERCIAL MORTGAGE-BACKED SECURITIES

As noted above, the Company may seek to invest in real estate-related debt
instruments, which may include commercial mortgage-backed securities. Many of
the risks of investing in commercial mortgage-backed securities reflect the
risks of investing directly in the real estate securing the underlying mortgage
loans. This may be especially true in the case of commercial mortgage securities
secured by, or evidencing an interest in, a single commercial mortgage loan or a
relatively small or less diverse pool of commercial mortgage loans. See
"--Disadvantages of Investments in Mortgage Loans."

The risks of investing in commercial mortgage-backed securities include
risks that the existing credit support will prove to be inadequate, either
because of unanticipated levels of losses or, if such credit support is provided
by a third party, because of difficulties experienced by such provider. Delays
or difficulties encountered in servicing commercial mortgage-backed securities
may cause greater losses and, therefore, greater resort to credit support than
was originally anticipated, and may cause a rating agency to downgrade a
security.

The Company may acquire subordinated tranches of commercial mortgage-backed
securities issuances. In general, subordinated tranches of commercial
mortgage-backed securities are entitled to receive repayment of principal only
after all principal payments have been made on more senior tranches and also
have subordinated rights as to receipt of interest distributions. In addition,
an active secondary market for such subordinated securities is not as well
developed as the market for certain other mortgage-backed securities.
Accordingly, such subordinated commercial mortgage-backed securities may have
limited marketability and there can be no assurance that a more efficient
secondary market will develop.

LIMITATIONS ON REMEDIES

Although the Company will have certain contractual remedies upon the default
by borrowers under certain debt instruments, such as foreclosing on the
underlying real estate or collecting rents generated therefrom, certain legal
requirements (including the risks of lender liability) may limit the ability of
the Company to effectively exercise such remedies.

The right of a mortgage lender to convert its loan position into an equity
interest may be limited or prevented by certain common law or statutory
provisions.

THIRD-PARTY BANKRUPTCY RISKS

Investments made in assets operating in workout modes or under Chapter 11 of
the Bankruptcy Code could be subordinated or disallowed, and the Company could
be liable to third parties in such circumstances. Furthermore, distributions
made to the Company in respect of such investments could be recovered if any
such distribution is found to be a fraudulent conveyance or preferential
payment. Bankruptcy laws, including the automatic stay imposed upon the filing
of a bankruptcy petition, may delay the ability of the Company to realize on
collateral for loan positions held by it or may adversely affect the

25
<PAGE>
priority of such loans through doctrines such as equitable subordination or may
result in a restructure of the debt through principles such as the "cramdown"
provisions of the bankruptcy laws.

RISKS ASSOCIATED WITH POTENTIAL REGISTRATION UNDER INVESTMENT COMPANY ACT

The Company is currently not registered as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), since
management believes that the Company either is not within the definition of
"investment company" thereunder or, alternatively, is excluded from regulation
under the Investment Company Act by one or more exemptions. In the future, the
Company will seek to continue to conduct its operations so as to avoid
registration under the Investment Company Act. Therefore, the assets that the
Company may acquire or sell may be limited by the provisions of the Investment
Company Act. If the Company were to become an investment company under the
Investment Company Act and if it failed to qualify for an exemption thereunder,
it would be unable to conduct its business as presently conducted which could
have a material adverse effect on the Company and the market price for the
Company Common Stock.

UNINSURED LOSSES

The Company will carry comprehensive liability, fire, extended coverage and
rental loss insurance with respect to all of the properties that it owns, with
policy specifications, insured limits and deductibles customarily carried for
similar properties. There are, however, certain types of losses (such as losses
arising from acts of war or relating to pollution) that are not generally
insured because they are either uninsurable or not economically insurable.
Should an uninsured loss or a loss in excess of insured limits occur, the
Company could lose its capital invested in a property, as well as the
anticipated future revenue from such property and would continue to be obligated
on any mortgage indebtedness or other obligations related to the property. Any
such loss would adversely affect the financial condition and results of
operations of the Company.

With respect to those properties in which the Company holds an interest
through a mortgage, as well as those properties owned by entities to whom the
Company makes unsecured loans, the borrowers will most likely be obligated to
maintain insurance on such properties and to arrange for the Company to be
covered as a named insured on such policies. The face amount and scope of such
insurance coverage may be less comprehensive than the Company would carry if it
held the fee interest in such property. Accordingly in such circumstances, or in
the event that the borrowers fail to maintain required coverage, uninsured or
underinsured losses may occur, which could have an adverse impact on the
Company's cash flow or financial condition.

POTENTIAL ENVIRONMENTAL LIABILITY RELATED TO THE PROPERTIES

Under various Federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
These laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The cost of any required remediation and the owner's liability
therefor as to any property is generally not limited under such enactments and
could exceed the value of the property and/or the aggregate assets of the owner.
The presence of such substances, or the failure to properly remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. Persons who arrange for
the disposal or treatment of hazardous or toxic substances also may be liable
for the costs of removal or remediation of such substances at a disposal or
treatment facility, whether or not such facility is owned or operated by such
persons. Certain environmental laws govern the removal, encapsulation or
disturbance of asbestos-containing materials ("ACMs") when such materials are in
poor condition, or in the event of renovation or demolition. Such laws impose
liability for release of ACMs into the air and third parties may seek recovery
from owners or operators of real properties for personal injury associated with
ACMs. The operation and subsequent removal of certain underground storage tanks
also are regulated by

26
<PAGE>
Federal and state laws. In connection with the ownership (direct or indirect),
operation, management and development of real properties, the Company may be
considered an owner or operator of such properties or as having arranged for the
disposal or treatment of hazardous or toxic substances, and, therefore,
potentially liable for removal or remediation costs, as well as certain other
related costs, including governmental fines and injuries to persons and
property. See "BUSINESS AND PROPERTIES-- Environmental Matters."

CHANGES IN POLICIES WITHOUT STOCKHOLDER APPROVAL

The investment, financing, borrowing and distribution policies of the
Company and its policies with respect to all other activities, growth, debt,
capitalization and operations, will be determined by the Company Board. Although
it has no present intention to do so, the Company Board may amend or revise
these policies at any time and from time to time at its discretion without a
vote of the stockholders of the Company. A change in these policies could
adversely affect the Company's financial condition, results of operations and
the market price of the Company Common Stock.

HEDGING POLICIES/RISKS

In connection with the financing of certain real estate investments, the
Company may employ hedging techniques designed to protect the Company against
adverse movements in currency and/or interest rates. While such transactions may
reduce certain risks, such transactions themselves may entail certain other
risks. Thus, while the Company may benefit from the use of these hedging
mechanisms generally, unanticipated changes in interest rates, securities
prices, or currency exchange rates may result in a poorer overall performance
for the Company than if it had not entered into such hedging transactions. See
"THE COMPANY--Financing Policies."

DIVIDEND POLICY

The future payment of dividends by the Company will depend on decisions that
will be made by the Company Board from time to time based on the results of
operations and financial condition of the Company and such other business
considerations as the Company Board considers relevant. The Company presently
anticipates that it will retain all available funds for use in the operation and
expansion of its business and does not anticipate paying any dividends in the
foreseeable future. See "THE DISTRIBUTION--Quotation and Trading of Company
Common Stock; Dividend Policy."

In addition, the stock market has experienced extreme price and volume
fluctuations which have affected the market price of many companies and which
have at times been unrelated to the operating performance of the specific
companies whose stock is traded. Broad market fluctuations and general economic
conditions may adversely affect the market price of the Company Common Stock.

CERTAIN ANTI-TAKEOVER FEATURES

Upon consummation of the Distribution, certain provisions of the Company
Certificate and the Company Bylaws, along with certain provisions of Delaware
statutory law, could discourage potential acquisition proposals and could delay
or prevent a change in control of the Company. Such provisions include ARTICLE
FOURTH of the Company Certificate which authorizes the Company Board to issue
additional shares of preferred stock of the Company, in one or more series, and
to establish the rights and preferences (including the convertibility of such
shares of preferred stock into shares of Company Common Stock) of any series of
preferred stock so issued. Such provisions could diminish the opportunities for
a stockholder to participate in tender offers, including tender offers at a
price above the then current market value of the Company Common Stock. Such
provisions also may inhibit fluctuations in the market price of the Company
Common Stock that could result from takeover attempts. See "LEGACY CERTIFICATE
OF INCORPORATION AND BYLAWS."

27
<PAGE>
DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the efforts of its executive officers and other
key personnel. While the Company believes that it could find replacements for
these persons, the loss of their services could have a temporary adverse effect
on the operations of the Company. None of the Company's executive officers or
other key personnel has an employment agreement with the Company. There can be
no assurance that the Company will be able to retain these persons or to attract
suitable replacements or additional personnel if required. The Company has not
obtained key-man insurance for any of its executive officers or other key
personnel.

COSTS OF COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS

Under the Americans with Disabilities Act of 1980 (the "ADA"), places of
public accommodations and commercial facilities are required to meet certain
Federal requirements related to access and use by disabled persons. Compliance
with ADA requirements could require both structural and non-structural changes
to the properties in which the Company invests and noncompliance could result in
the imposition of fines by the United States government or an award of damages
to private litigants. Although management of the Company believes that its
properties are substantially in compliance with present requirements of the ADA,
the Company may incur additional costs of compliance in the future. A number of
additional Federal, state and local laws exist which impose further burdens or
restrictions on owners with respect to access by disabled persons and may
require modifications to properties in which the Company invests, or restrict
certain further renovations thereof, with respect to access by disabled persons.
Final regulations under the ADA have not yet been promulgated and the ultimate
amount of the cost of compliance with the ADA or other such laws is not
currently ascertainable. While such costs are not expected to have a material
effect on the Company, they could be substantial. If required changes involve
greater expense than the Company currently anticipates, the Company's financial
condition and results of operations could be adversely affected.

NONCOMPLIANCE WITH OTHER LAWS

Real estate properties also are subject to various Federal, state and local
regulatory requirements, such as state and local fire and life safety
requirements. Failure to comply with these requirements could result in the
imposition of fines by governmental authorities or awards of damages to private
litigants. The Company believes that its properties are currently in material
compliance with all such regulatory requirements. However, there can be no
assurance that these requirements will not be changed or that new requirements
will not be imposed which would require significant unanticipated expenditures
by the Company and could have an adverse effect on the Company's results of
operations.

28
<PAGE>
RELATIONSHIP BETWEEN LEGACY AND EXCEL
AFTER THE DISTRIBUTION

For the purpose of governing certain of the ongoing relationships between
the Company, Excel and EDV after the Distribution and to provide mechanisms for
an orderly transition, the Company, Excel and EDV have entered or will enter
into various agreements, and will adopt policies, as described in this section.

DISTRIBUTION AGREEMENT

Prior to the Distribution Date, the Company, Excel and EDV will enter into
the Distribution Agreement, which provides for, among other things, (i) the
division between the Company, Excel and EDV of certain assets and liabilities,
(ii) the Distribution, and (iii) certain other agreements governing the
relationship between the Company, Excel and EDV following the Distribution.
Pursuant to the Distribution Agreement, as consideration for the asset
transfers, the Company will issue to Excel (a) a sufficient number of shares of
Company Common Stock to effect the Distribution, and (b) a promissory note
payable to Excel in the amount of approximately $24.9 million. Such note will
bear interest at the rate of 12.0% per annum, mature in and be a
non-recourse obligation secured by a first mortgage on the Scottsdale Galleria.
In addition, in connection with the asset transfers, Excel will cancel certain
indebtedness of EDV currently held by Excel in the amount of approximately $32.5
million. See "CERTAIN TRANSACTIONS."

Subject to certain exceptions, the Distribution Agreement provides for,
among other things, assumptions of liabilities and cross-indemnities designed to
allocate to the Company, effective as of the Distribution Date, financial
responsibility for the liabilities arising out of or in connection with the
assets to be transferred to the Company pursuant to the Distribution Agreement.
The agreements to be executed in connection with the Distribution Agreement set
forth certain specific allocations of liabilities between the Company, Excel and
EDV. See "--Employee Benefits Allocation Agreement" and "--Tax Sharing
Agreement."

The Distribution Agreement also provides that by the Distribution Date, the
Company Certificate and the Company Bylaws shall be in the forms attached hereto
as Annex I and II, respectively, and that the Company and Excel will take all
actions which may be required to elect or otherwise appoint, as directors of the
Company, the persons indicated herein. See "MANAGEMENT" and "LEGACY CERTIFICATE
OF INCORPORATION AND BYLAWS."

The Distribution Agreement also provides that each of the Company, Excel and
EDV will be granted access to certain records and information in the possession
of the others, and requires the retention by each of the Company, Excel and EDV
for a period of ten years following the Distribution of all such information in
its possession, and thereafter requires that each party give the others prior
notice of its intention to dispose of such information. In addition, the
Distribution Agreement provides for the allocation of shared privileges with
respect to certain information and requires each of the Company, Excel and EDV
to obtain the consent of the others prior to waiving any shared privilege.

The Distribution Agreement provides that, except as otherwise set forth
therein or in any related agreement, all costs and expenses in connection with
the Distribution will be charged to the party for whose benefit the expenses are
incurred, with any expenses that cannot be allocated on such basis to be split
equally between the parties.

EMPLOYEE BENEFITS ALLOCATION AGREEMENT

The Distribution Agreement calls for Excel and the Company to enter into an
Employee Benefits and Other Employment Matters Allocation Agreement (the
"Employee Benefits Allocation Agreement") containing a number of provisions
relating to current and former employees of Excel. The Employee Benefits
Allocation Agreement generally contemplates that the Company will assume no
obligations or liabilities with respect to employee plans or benefits of Excel
prior to the Distribution Date, and that Excel will be responsible for
continuing to provide employee benefits (other than those provided under the
Legacy Stock Option Plan) for the Excel personnel who become employees of the
Company after the Distribution Date.

29
<PAGE>
Prior to the Distribution Date, Excel, as sole stockholder of the Company,
will approve the adoption by the Company of the Legacy Stock Option Plan for
purposes of granting awards of Company Common Stock to employees, officers and
directors of the Company subsequent to the Distribution. Excel also will approve
the reservation of 5,250,380 shares of Company Common Stock under the Legacy
Stock Option Plan, and the grant of options to acquire 3,100,000 of such shares
to the Company's executive officers upon consummation of the Distribution. For a
discussion of the principal terms and conditions of the Legacy Stock Option
Plan, see "MANAGEMENT--Legacy Stock Option Plan."

TAX SHARING AGREEMENT

Excel and the Company will enter into a Tax Sharing Agreement defining the
parties' rights and obligations with respect to tax returns and tax liabilities,
including, in particular, Federal and state income tax returns and liabilities,
for taxable years and other taxable periods ending on or before the Distribution
Date. In general, Excel will be responsible for (i) filing all Federal and state
income tax returns of Excel, the Company and any of their subsidiaries for all
taxable years ending on or before the Distribution Date, and (ii) paying the
taxes relating to such returns (including any deficiencies proposed by
applicable taxing authorities). For post-Distribution periods, Excel and the
Company will each be responsible for filing its own returns and paying its own
taxes relating to such returns (including any deficiencies proposed by
applicable taxing authorities). Excel and the Company will cooperate with each
other and share information in preparing income tax returns and in dealing with
other tax matters.

TRANSITIONAL SERVICES AGREEMENT

The Company and Excel will enter into a Transitional Services Agreement (the
"Transitional Services Agreement") pursuant to which Excel will provide certain
property acquisition, management and other services to the Company on a
transitional basis. The fees for such transitional services will be based on
hourly rates or a percentage of revenues designed to reflect the actual costs
(including indirect costs) of providing such services. The Company will be free
to procure such services from outside vendors or to develop in-house
capabilities in order to provide such services internally. The Transitional
Services Agreement will terminate on December 15, 1998 unless extended in
writing by the parties. The income Excel receives pursuant to the Transitional
Services Agreement will not be qualifying income for purposes of the 75.0% REIT
income test.

INTERCOMPANY AGREEMENT

The Company and Excel will enter into the Intercompany Agreement on or prior
to the Distribution Date to provide each other with rights to participate in
certain transactions. See "THE COMPANY-- Intercompany Agreement."

POLICIES AND PROCEDURES FOR ADDRESSING CONFLICTS

30
<PAGE>

the same positions with the Company, and Mark T. Burton, who is currently Senior
Vice President-- Acquisitions of Excel and who will serve in the same position
with the Company. See "MANAGEMENT."

Based solely on their ownership of Excel Common Stock and options to acquire
Excel Common Stock on the Record Date, the executive officers and directors of
the Company will beneficially own an aggregate of shares, or
approximately %, of the outstanding Company Common Stock immediately following
the Distribution. In addition, certain officers of the Company (i) have agreed
to purchase, effective upon consummation of the Distribution, 9,195,224 shares
of Company Common Stock in a private placement, and (ii) will be granted options
to acquire 3,100,000 shares of Company Common Stock under the Legacy Stock
Option Plan upon consummation of the Distribution. As a result, the executive
officers and directors of the Company will beneficially own or have the right to
acquire an aggregate of shares, or approximately %, of the outstanding
Company Common Stock immediately following the Distribution. The Company has
agreed to loan to certain of its officers, in connection with their purchase of
Company Common Stock described above, 50.0% of the purchase price therefor (an
aggregate amount of approximately $11.0 million). See "RISK FACTORS--Control by
Executive Officers and Directors"; "MANAGEMENT--Legacy Stock Option Plan";
"CERTAIN TRANSACTIONS" and "SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT."

The Company and Excel intend to pursue separate and distinct business
strategies to minimize potential conflicts of interest between the two
companies. Nonetheless, the on-going relationships between the Company and Excel
may present conflict situations for the persons who will serve as officers
and/or directors of both the Company and Excel, and who will own (or have
options or other rights to acquire) a significant number of shares of common
stock in both companies. Such persons may be presented with conflicts of
interest with respect to certain matters affecting the Company and Excel, such
as the determination of which company may take advantage of potential business
opportunities, decisions concerning the business focus of each company
(including decisions concerning the types of properties and geographic locations
in which such companies make investments), potential competition between the
business activities conducted, or sought to be conducted, by such companies
(including competition for properties and tenants), possible corporate
transactions (such as acquisitions), and other strategic decisions affecting the
future of such companies. Conflicts also may arise with respect to the
restriction on the Company's right to engage in certain activities or make
certain investments unless Excel was first offered the opportunity and declined
to pursue such activities or investments (as described below).

The Company and Excel will adopt appropriate policies and procedures on or
prior to the Distribution Date to be followed by the Board of Directors of each
company to limit the involvement of such officers and directors in conflict
situations. Such procedures include requiring the persons serving as directors
of both companies to abstain from voting as directors with respect to matters
that present a significant conflict of interest between the companies. Whether
or not a significant conflict of interest situation exists will be determined on
a case-by-case basis depending on such factors as the dollar value of the
matter, the degree of personal interest of any officers or directors in the
matter and the likelihood that resolution of the matter has significant
strategic, operational or financial implications for the business of the Company
and/or Excel. In addition, the Company Certificate contains a specific purpose
clause which identifies at the outset which types of opportunities will be
pursued by the Company. This clause provides that the Company's purpose includes
performing the Intercompany Agreement, which prohibits the Company from engaging
in certain activities or making certain investments unless Excel was first
offered the opportunity and declined to pursue such activities or investments.
See "RISK FACTORS--Possible Conflicts with Excel After the Distribution" and
"THE COMPANY--Intercompany Agreement."

REGULATORY APPROVALS

The Company does not believe that any material Federal or state regulatory
approvals will be necessary in connection with the Distribution.

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<PAGE>
PRO FORMA COMBINED CAPITALIZATION

The following table sets forth the capitalization of the Company as of
October 31, 1997, the adjustments required to give effect to the Distribution
and the pro forma capitalization of the Company at such date. The table should
be read in conjunction with the historical and pro forma combined financial
statements and the notes thereto contained elsewhere herein.

<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgages payable...................................................................... -- $ 37,250
Notes payable--Excel................................................................... -- 24,936
---------- -----------
Total debt........................................................................... -- 62,186
Stockholders' equity..................................................................... 1 121,860
---------- -----------
Total capitalization................................................................. 1 $ 184,046
---------- -----------
---------- -----------
</TABLE>

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<PAGE>
EXCEL LEGACY CORPORATION
UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma balance sheet of Legacy as of October 31,
1997 and unaudited pro forma condensed combined statement of operations for the
three months ended October 31, 1997 and the year ended July 31, 1997 have been
prepared to reflect the results of the Distribution, issuance of preferred and
common shares, acquisition of properties by the Company, and adjustment of
properties to fair market value. The unaudited pro forma balance sheet has been
prepared as if the transactions had occurred on October 31, 1997. The unaudited
pro forma statements of operations have been prepared as if the transactions had
occurred at the beginning of the year ended July 31, 1997. The unaudited pro
forma financial information is not necessarily indicative of the results that
actually would have occurred if the Distribution and capitalization had been
consummated as of October 31, 1997.

PRO FORMA BALANCE SHEET--UNAUDITED
AS OF OCTOBER 31, 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
TRANSFER OF ASSETS BY
EXCEL AND EDV
EXCEL LEGACY ------------------------ COMMON AND
CORPORATION ASSET GROUP OTHER PREFERRED STOCK PRO FORMA PRO FORMA
HISTORICAL(A) AUDITED(B) ASSETS(C) TO BE ISSUED(D) ADJUSTMENTS(E) CONSOLIDATED
--------------- ----------- ----------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Real estate:
Land............................ $ -- $ 15,324 $ 3,274 $ -- $ 18,232(1) $ 37,479
649(2)

Buildings....................... -- 34,789 6,081 -- 32,446(1) 74,520
1,204(2)
Under development............... -- 14,191 -- -- 10,809(2) 25,000
Accumulated depreciation........ -- (4,040) -- --, 4,040(2) 0
----- ----------- ----------- ------- --------------- ------------
Net real estate............... -- 60,264 9,355 -- 67,380 136,999
Cash.............................. 1 -- -- 72,169 (49,918)(3) 21,492
(760)(1)

Notes receivable.................. -- 21,981 -- -- -- 21,981

Interest receivable............... -- 2,009 -- -- -- 2,009
Leasehold interest................ -- -- 1,790 -- -- 1,790
----- ----------- ----------- ------- --------------- ------------
Total assets.................. $ 1 $ 84,254 $ 11,145 $ 72,169 $ 16,702 $ 184,271
----- ----------- ----------- ------- --------------- ------------
----- ----------- ----------- ------- --------------- ------------
LIABILITIES:
Mortgages payable................. $ -- $ 34,657 $ 2,593 $ -- $ -- $ 37,250
Notes Payable..................... -- -- -- -- 49,918(1) 0
(49,918)(3)

Notes Payable--Excel.............. -- -- -- -- 24,936(4) 24,936
Interest payable.................. -- 225 -- -- -- 225
----- ----------- ----------- ------- --------------- ------------
Total liabilities............. -- 34,882 2,593 -- 24,936 62,411
----- ----------- ----------- ------- --------------- ------------
STOCKHOLDERS' EQUITY:
Preferred stock................... -- -- -- 628 -- 628
Common stock...................... -- 2 -- 1 -- 3
Additional paid-in capital........ 1 49,370 8,552 82,528 (24,936)(4) 132,217
16,702(2)
Retained earnings................. -- -- -- -- -- --
----- ----------- ----------- ------- --------------- ------------
1 49,372 8,552 83,157 (8,234) 132,848
Due from officers for common
shares...................... -- -- -- (10,988) -- (10,988)
----- ----------- ----------- ------- --------------- ------------
Total stockholders' equity.... 1 49,372 8,552 72,169 (8,234) 121,860
----- ----------- ----------- ------- --------------- ------------

Total liabilities and
stockholders' equity........ $ 1 $ 84,254 $ 11,145 $ 72,169 $ 16,702 $ 184,271
----- ----------- ----------- ------- --------------- ------------
----- ----------- ----------- ------- --------------- ------------
</TABLE>

33
<PAGE>
NOTES TO PRO FORMA BALANCE SHEET

A) Reflects the audited historical balance sheet of Excel Legacy Corporation
(the "Company") as of November 17, 1997. Excel Realty Trust, Inc. ("Excel")
is the sole stockholder of the Company and the Company is currently
considered a qualified REIT subsidiary of Excel.

B) Reflects the transfer at historical cost of the assets and liabilities
currently held by Excel and ERT Development Corporation ("EDV") to the
Company for stock. See Combined Balance Sheet of Excel Legacy Corporation
Asset Group (the "Asset Group") at F-6. The transfer by Excel and EDV will
include (1) ten single tenant buildings with related mortgages, (2) a
substantially vacant shopping mall, the Scottsdale Galleria, in Scottsdale,
Arizona which the Company intends to redevelop, and (3) four notes
receivable related to development projects located in Arizona and
California. The historical cost of the assets and liabilities have been
adjusted to fair market value in the column "Pro Forma Adjustments" on the
Pro Forma Balance Sheet as outlined in Note E below.

C) The following assets were purchased by EDV from third parties within the last
five months with the intent of transferring them to the Company. The cost to
EDV is also considered to be the fair market value of the assets. The
following adjustments have been made to the Pro Forma Balance Sheet: (1) The
purchase of the Scottsdale City Centre office building in October 1997 for
$7.7 million with a mortgage payable of $2.6 million. (2) The purchase of
the Brio Land in Scottsdale, Arizona for $1.7 million in November 1997. (3)
The purchase of a leasehold interest in a parcel of land near the Grand
Canyon in Arizona in November 1997 for $1.8 million in cash.

D) Certain officers of the Company may purchase up to $22.0 million in stock
from the Company by paying $11.0 million in cash and $11.0 in notes
receivable at 7.0% interest. The notes receivable have been recorded as an
offset to total stockholders' equity. The capitalization is valued at $2.39
per share. The issuance of the shares will give the officers 33.5% of the
common stock ownership of the Company. This will result in the assets and
liabilities being recorded at fair market value on the financial statements
of the Company, as noted in Note E below, instead of the cost currently on
the books of Excel and EDV.

Also represents 12,550,000 shares of Series A Preferred Stock of the Company
that certain qualified institutional buyers have committed to purchase at
$5.00 per share immediately after the Distribution. The proceeds will be
approximately $61.2 million after issuance costs. The Series A Preferred
Stock will be converted to Company Common Stock automatically after the
Company Common Stock has been trading above $5.00 per share for 30
consecutive days.

E) Represents the following pro forma adjustments as numbered on the face of the
Pro Forma Balance Sheet: (1) The Company purchased two AMC theaters in
Colorado in January 1998 for $49.9 million with bank financing due March 25,
1998. Also includes $760,000 for the purchase of the Telluride property in
January 1998. (2) The adjustment from cost to market value of the assets
being transferred from Excel and EDV to the Company. The assets for
accounting purposes, under APB Opinion 29, are accounted for at fair value
as a non-reciprocal transfer of non-monetary assets. The board of directors
of Excel will receive a fairness opinion as to the fair value of the assets
prior to the transfer. (3) The Company will use the proceeds from the common
and preferred stock offerings to repay the $49.9 million bank loan on the
AMC theaters. (4) In lieu of equity for the entire amount of property being
contributed by EDV and Excel to the Company, the Company will issue a note
payable to Excel for $24.9 million that will be secured by a trust deed on
the Scottsdale Galleria property.

34
<PAGE>

EXCEL LEGACY CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS--UNAUDITED
FOR THE YEAR ENDED JULY 31, 1997 AND
THE THREE MONTHS ENDED OCTOBER 31, 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
TRANSFER OF ASSETS BY
EXCEL LEGACY EXCEL AND EDV COMMON AND
CORPORATION ---------------------------- PREFERRED
HISTORICAL ASSET GROUP OTHER STOCK TO BE PRO FORMA
THREE MONTHS ENDED OCTOBER 31, 1997 (A) AUDITED (B) ASSETS (C) ISSUED (D) ADJUSTMENTS (E)
- ------------------------------------- ------------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Revenues:
Rental............................. $ -- $ 1,234 $ 298 $ -- $ 1,233(1)
Interest........................... -- 657 -- 192 (8)(2)
------------- ------ ----- ------ ------
Total revenues................... -- 1,891 298 192 1,225
------------- ------ ----- ------ ------

Expenses:
Interest........................... -- 680 64 -- --
Depreciation....................... -- 217 38 -- 203(1)
8(3)

Property operations................ -- -- 103 -- --
General and administrative......... -- 163 11 -- 12(1)
99(4)
------------- ------ ----- ------ ------
Total expenses................... -- 1,060 216 -- 322
------------- ------ ----- ------ ------
Net income before taxes.............. -- 831 82 192 903
Current income tax expense (F)....... -- 331 33 76 360
------------- ------ ----- ------ ------
Net income........................... $ -- $ 500 $ 49 $ 116 $ 543
------------- ------ ----- ------ ------
------------- ------ ----- ------ ------
Net income per common share (G):
Basic..............................
Fully-Diluted......................

PRO FORMA
THREE MONTHS ENDED OCTOBER 31, 1997 CONSOLIDATED
- ------------------------------------- -------------
<S> <C>
Revenues:
Rental............................. $ 2,765
Interest........................... 841
-------------
Total revenues................... 3,606
-------------
Expenses:
Interest........................... 744
Depreciation....................... 466

Property operations................ 103
General and administrative......... 285

-------------
Total expenses................... 1,598
-------------
Net income before taxes.............. 2,008
Current income tax expense (F)....... 800
-------------
Net income........................... $ 1,208
-------------
-------------
Net income per common share (G):
Basic.............................. $ 0.04
Fully-Diluted...................... $ 0.03
</TABLE>

<TABLE>
<CAPTION>
TRANSFER OF ASSETS BY
EXCEL LEGACY EXCEL AND EDV COMMON AND
CORPORATION -------------------------- PREFERRED
HISTORICAL ASSET GROUP OTHER STOCK TO BE PRO FORMA PRO FORMA
YEAR ENDED JULY 31, 1997 (A) AUDITED (B) ASSETS (C) ISSUED (D) ADJUSTMENTS (E) CONSOLIDATED
- ------------------------------------- ------------- ------------- ----------- --------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental............................. $ -- $ 4,937 $ 1,192 $ -- $ 4,933(1) $ 11,062
Interest........................... -- 1,458 -- 769 1,139(2) 3,366
------------- ------ ----------- ------ ------ -------------
Total revenues................... -- 6,395 1,192 769 6,072 14,428
------------- ------ ----------- ------ ------ -------------

Expenses:
Interest........................... -- 2,896 257 -- -- 3,153
Depreciation....................... -- 870 152 -- 811(1) 1,863
30(3)

Property operations................ -- -- 412 -- -- 412
General and administrative......... -- 799 45 -- 49(1) 1,290
397(4)
------------- ------ ----------- ------ ------ -------------

Total expenses................... -- 4,565 866 -- 1,287 6,718
------------- ------ ----------- ------ ------ -------------
Net income before taxes.............. -- 1,830 326 769 4,785 7,710
Current income tax expense (F)....... -- 729 130 306 1,906 3,071
------------- ------ ----------- ------ ------ -------------
Net income........................... $ -- $ 1,101 $ 196 $ 463 $ 2,879 $ 4,639
------------- ------ ----------- ------ ------ -------------
------------- ------ ----------- ------ ------ -------------
Net income per common share (G):
Basic.............................. $ 0.15
Fully-Diluted...................... $ 0.11
</TABLE>

35
<PAGE>

NOTES TO PRO FORMA STATEMENTS OF OPERATIONS

A) The Company had no operations prior to the spin-off.

B) Reflects the historical revenue and expenses associated with the transfer of
the assets held by Excel and EDV. See Combined Statements of Operations of
Excel Legacy Corporation Asset Group at page F-7.

C) The rental revenue, interest, depreciation, property operation and general
and administrative expenses are the estimated revenue and expenses from the
Scottsdale City Centre office building purchased in October 1997 and the
Brio Land purchased in November 1997. These properties were purchased from
third parties by EDV with the intent of transferring them to the Company
upon the Distribution.

D) The interest income represents interest earned on the notes from the
officers. Interest earned on cash reserves has not been included in the Pro
Forma Statements of Operations. No income return has been projected on the
cash received from the committed sale of Series A Preferred Stock of the
Company to be purchased by certain qualified institutional buyers or from
the cash to be received by the Company for the sale of Company Common Stock
to certain officers.

E) Represents the following pro forma adjustments as numbered on the face of the
Pro Forma Statements of Operations: (1) An adjustment has been made for the
rental revenue which the Company will receive from two AMC theatres
purchased in January 1998. Adjustments were also made to depreciation and
management fee expenses (general and administrative) for this purchase. The
Series A Preferred Stock proceeds will be used to repay the $49.9 million
bank loan on the AMC theaters, therefore, no interest expense has been
presented as an adjustment on the Pro Forma Statements of Operations. (2)
The amount of interest income has been adjusted to reflect the amount of
income being accrued on the current notes receivable. (3) An adjustment has
been made to depreciation expense for the adjustment of the real estate
assets to fair market value, according to APB Opinion 29 as outlined in Note
E of the Notes to Pro Forma Balance Sheet. (4) The adjustment of general and
administrative expenses represents the estimated overhead costs of forming
and operating the Company.

F) All income taxes are considered current expense in the Pro Forma Statements
of Operations. The Company is not aware of any timing differences between
future book and taxable net income.

G) The per share amounts of income have been calculated using the following for
both the three months ended October 31, 1997 and year ended July 31, 1997.
The common shares outstanding of 30,193,617 were used for the denominator in
the basic per share calculation with net income as the numerator. There is
no preferred stock dividend to subtract from net income to arrive at basic
per share net income. The fully diluted calculation uses 42,743,617 shares
outstanding as the denominator which represents the 30,193,167 common shares
plus the 12,550,000 shares of preferred stock that are treated as stock
equivalents. The numerator for the fully diluted calculation was also the
net income.

36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

NATURE OF BUSINESS

The Company was only recently formed and has no operating history. The
Company was organized to create and realize value by identifying and making
opportunistic real estate investments through the direct acquisition,
rehabilitation, development, financing and management of real properties and/or
participation in these activities through the purchase of debt instruments or
equity interests of entities engaged in such real estate businesses.

LIQUIDITY

In connection with the formation and capitalization of the Company, the
Company will receive approximately $11.0 million in cash and approximately $11.0
million in notes receivable from the sale of Company Common Stock to certain
officers of the Company. Such notes will bear interest at the rate of 7.0% per
annum, mature in 2003 and be recourse obligations of such officers.
In addition, the Company plans to sell shares of Series A Preferred
Stock for a total purchase price of approximately $200.0 million immediately
following the Distribution. See "CERTAIN TRANSACTIONS."

The Company anticipates that cash flow from operations will be adequate to
meet its short-term liquidity requirements. The Company expects to meet its
long-term liquidity requirements, such as property acquisitions and development
and mortgage debt maturities, through the most advantageous sources of capital
available to the Company at the time, which may include the sale of common
stock, preferred stock or debt securities through public offerings or private
placements, the incurrence of indebtedness through secured or unsecured
borrowings and the reinvestment of proceeds from the disposition of assets.

RESULTS OF OPERATIONS

The results of operations for the Excel Legacy Corporation Asset Group are
set forth below.

COMPARISON OF THE YEAR ENDED JULY 31, 1997 TO THE YEAR ENDED JULY 31, 1996.

There was no change in RENTAL REVENUE between the years ended July 31, 1997
and 1996.

INTEREST REVENUE for the year ended July 31, 1997 was $1,458,000, an
increase of 1435.0% over interest revenue of $95,000 for the year ended July 31,
1996. The increase is primarily attributable to additional loans made on the Los
Arcos and First Street projects during the year.

INTEREST EXPENSE for the year ended July 31, 1997 was $2,896,000, a decrease
of 6.0% over interest expense of $3,080,000 for the year ended July 31, 1996.
The decrease is primarily attributable to recurring principal payments on the
mortgages on those properties occupied by Wal-Mart and Lowe's.

ADMINISTRATIVE EXPENSES for the year ended July 31, 1997 were $799,000, an
increase of 42.0% over administrative expenses of $563,000 for the year ended
July 31, 1996. The increase is primarily attributable to salary and wage
expense.

THE PROVISION FOR INCOME TAXES for the year ended July 31, 1997 was
$729,000, an increase of 252.0% over income tax expense of $207,000 in the
comparable period in 1996. The increase is attributable to the increase in
income before taxes during the year.

COMPARISON OF YEAR ENDED JULY 31, 1996 TO THE YEAR ENDED JULY 31, 1995.

RENTAL REVENUE for the year ended July 31, 1996 was $4,937,000, a decrease
of 16.0% over rental revenue of $5,897,000 for the year ended July 31, 1995. The
decrease is attributable to the reclassification

37
<PAGE>

of the Scottsdale Galleria from real estate to real estate under development. As
a result of the reclassification, costs to develop the property, net of
incidental revenues earned, are capitalized to the basis of the property rather
than recognized as revenue and expense.

INTEREST REVENUE for the year ended July 31, 1996 was $95,000, an increase
of 100.0% over interest revenue for the year ended July 31, 1995. The increase
is attributable to the initiation of the Los Arcos and First Street notes
receivable during the year.

INTEREST EXPENSE for the year ended July 31, 1996 was $3,080,000, a decrease
of 3.0% over interest expense of $3,185,000 for the year ended July 31, 1995.
The decrease is primarily attributable to recurring principal payments on the
mortgages on those properties occupied by Wal-Mart and Lowe's.

ADMINISTRATIVE EXPENSES for the year ended July 31, 1996 were $563,000, an
increase of 3.0% over administrative expenses of $548,000 in 1995. The increase
is primarily attributable to salary and wage expenses.

THE PROVISION FOR INCOME TAXES for the year ended July 31, 1996 was
$207,000, a decrease of 60.0% over income tax expense of $515,000 in the
comparable period in 1995. The decrease is attributable to the decrease in
income before taxes during the year.

COMPARISON OF THREE MONTHS ENDED OCTOBER 31, 1997 TO THE THREE MONTHS ENDED
OCTOBER 31, 1996.

There was no change in RENTAL REVENUE between the three month periods ended
October 31, 1997 and October 31, 1996.

INTEREST REVENUE for the three months ended October 31, 1997 was $657,000,
an increase of 2333.0% over interest revenue of $27,000 in the comparable period
in 1996. The increase was primarily attributable to additional loans made on the
Los Arcos and First Street projects during the corresponding period.

INTEREST EXPENSE for the three months ended October 31, 1997 was $680,000, a
decrease of 10.0% over interest expense of $750,000 in the comparable period in
1996. The decrease is primarily attributable to recurring principal payments on
the mortgages on those properties occupied by Wal-Mart and Lowe's.

ADMINISTRATIVE EXPENSES for the three months ended October 31, 1997 were
$163,000, an increase of 12.0% over administrative expenses of $146,000 in the
comparable period in 1996. The increase is primarily attributable to salary and
wage expense.

THE PROVISION FOR INCOME TAXES for the three months ended October 31, 1997
was $331,000, an increase of 491.0% over income tax expense of $56,000 in the
comparable period in 1996. The increase is attributable to the increase in
income before taxes during the period.

Of the eleven properties to be transferred from the Excel Legacy Corporation
Asset Group to the Company, ten are single tenant properties with triple net
leases to Wal-Mart or Lowe's, each with over five years remaining on the leases.
The remaining property, the Scottsdale Galleria, is a shopping center under
redevelopment. All costs to redevelop the property, net of incidental revenues
earned, are capitalized to the basis of the property.

VALUATION OF PROPERTIES

Valuation of the single tenant properties transferred to the Company by
Excel was based upon an estimate of the fair market value of the assets
transferred. For these properties the value was determined by applying a 9.5%
capitalization rate to the net operating income of such properties. For
properties purchased by Excel within the last six months, the property valuation
was based on Excel's acquisition cost for the properties, since Excel was acting
as the nominee for the Company. In the opinion of Excel's management, due to the
short holding period of the property by Excel, the value of properties purchased
less than six months ago is not significantly different from the original cost.
The valuation of the Scottsdale

38
<PAGE>

Galleria was determined based upon binding purchase offers made to the Company
by willing, third-party, non-affiliated purchasers.

CAPITAL RESOURCES

Following the Distribution, the Company will own approximately $136.2
million in real estate that will be encumbered with mortgages in the amount of
$62.2 million. All properties will be encumbered with mortgages. In addition,
the Company will have $22.0 million in notes receivable that have been loaned on
various real estate development projects which will not be collected until the
projects are completed. The Company also will have recourse notes receivable
from various officers of the Company for approximately $11.0 million stemming
from their acquisition of shares of Company Common Stock. These notes are not
expected to be repaid for several years and will likely not be repaid until, and
if, the price of the Company Common Stock increases sufficiently for the
officers to borrow the loan amounts from an outside source and repay the
Company.

The Company will have approximately $21.5 million in cash after receipt of
$62.75 million from the sale of Series A Preferred Stock for which the Company
currently has commitments. The Company plans to sell shares of Series A
Preferred Stock for a total purchase price of approximately $200.0 million
immediately following the Distribution. The Company intends to use $49.9 million
of these proceeds to repay the loan and letters of credit used to finance the
purchase of the Highlands Ranch and Westminster, Colorado properties.

As of the date of this Information Statement, the Company has no commitments
to purchase any additional assets. The Company intends to operate its business
as described herein, however, and may purchase additional assets from time to
time in the future. The purchase of additional assets will be contingent upon
securing adequate funding on terms acceptable to the Company. The Company is not
aware of any material unfavorable trends in either capital resources or the
outlook for long-term cash generation, nor does it expect any material changes
in the availability and relative cost of such capital resources.

There are currently no material changes being considered in the objectives
and policies of the Company as set forth in this Information Statement.

39
<PAGE>
THE COMPANY

GENERAL

The Company was organized to create and realize value by identifying and
making opportunistic real estate investments through the direct acquisition,
rehabilitation, development, financing and management of real properties and/or
participation in these activities through the purchase of debt instruments or
equity interests of entities engaged in such real estate businesses. The Company
intends to provide investors with return opportunities that are not generally
available to publicly traded REITs due to investment limitations and leverage
expectations imposed by the public markets and Federal income tax laws
applicable to REITs.

To a large extent, public REITs, including Excel, manage their property
portfolios with consideration to both public market perceptions and tax laws.
Because investors are seeking a consistent and growing income stream from their
REIT investments, REITs are under constant pressure to (i) grow FFO, an
indicator of performance in the REIT industry, and (ii) maintain a low leverage
ratio (debt to total capitalization, one measure used to determine the relative
risk of that cash flow stream, as rising interest rates can diminish FFO and
impact dividends). As a result, REITs have generally been hesitant to
participate in long-term, higher-risk development projects or to bring their
leverage ratios to above 40.0%. In addition, the tax laws governing REITs
include limitations on (i) the types of assets that REITs may own and the time
period that real estate may be held, restricting REITs from investing in
operating companies and equity and debt securities, and participating in
short-term trading opportunities, and (ii) the ability of REITs to retain
earnings, requiring REITs to distribute 95.0% of net taxable income, excluding
capital gains, each year. Further, because gains on the sales of properties are
not included in the calculation of FFO, REITs are dissuaded from buying
distressed assets which may have substantial long-term appreciation potential
but lack immediate cash flow.

In such an environment, the Company believes that significant opportunities
are available to those investors that are not restricted by the Federal income
tax laws governing REITs or influenced by public market perception with regard
to REIT securities. Eleven of the properties to be transferred to the Company by
Excel are single tenant properties subject to long-term leases. Although
ownership of these properties by Excel is consistent with the limitations on
REITs described above, the management of Excel believes that optimal yields on
investments in such properties can only be obtained when the ratio of debt to
equity exceeds 80.0% of a given property's fair market value. As described
above, such leverage ratios far exceed the expectations for a REIT. Thus, Excel
believes that it is in the best interests of Excel and its stockholders to
transfer these assets to the Company.

40
<PAGE>

In addition to the properties it will own immediately following the
Distribution, the Company intends to invest in a variety of real estate related
assets such as (i) development opportunities that provide substantial value
appreciation rather than immediate cash flow, (ii) properties with long-term
leases enabling the Company to utilize a substantial amount of leverage, (iii)
properties requiring substantial repositioning or restructuring in order to
create significant value, such as changing the use, tenant mix or focus of a
property, and (iv) public and private debt and equity securities of real estate
related entities. Although such real estate related assets are not subject to
the limitations applicable to REITs described above, there are some risks
associated with investments in these types of assets. See "RISK FACTORS--
Disadvantages of Investments in Debt Instruments"; "--Disadvantages of
Investments in Mortgage Loans"; "--Potential Losses on Investments in Commercial
Mortgage-Backed Securities" and "--Limitations on Remedies". Further, the
Company will be able to manage the timing of asset dispositions without regard
to the minimum hold periods required of REITs while also acquiring properties
using substantial, yet prudent, leverage, to increase returns on what otherwise
might be less attractive investments. As opportunities emerge, the Company may
in the future expand its real estate related businesses and activities beyond
the areas listed above.

The Company and Excel will enter into the Intercompany Agreement on or prior
to the Distribution Date to provide each other with rights to participate in
certain transactions. In addition, the Company Certificate contains a specific
purpose clause which identifies at the outset which types of opportunities will
be pursued by the Company. This clause provides that the Company's purpose
includes performing the Intercompany Agreement, which prohibits, for so long as
the Intercompany Agreement remains in effect, the Company from engaging in
certain activities or making certain investments unless Excel was first offered
the opportunity and declined to pursue such activities or investments. See "RISK
FACTORS-- Possible Conflicts with Excel After the Distribution"; "RELATIONSHIP
BETWEEN LEGACY AND EXCEL AFTER THE DISTRIBUTION--Policies and Procedures for
Addressing Conflicts" and "-- Intercompany Agreement".

The Company currently does not intend to qualify as a REIT under the Code.
Consequently, the Company has the flexibility to respond quickly to
opportunities without the structural limitations inherent in REITs and to
operate, when deemed advantageous by management, on a more highly leveraged
basis than most REITs. By not qualifying as a REIT under the Code (which would
require the Company to distribute each year at least 95.0% of its net taxable
income, excluding capital gains), the Company has the ability and currently
intends to retain for reinvestment its cash flow generated from operations and
to sell properties without the substantial income tax penalties which may be
imposed on REITs in such transactions. In addition, the Company differs from
real estate opportunity funds that are typically structured as private
partnerships. In that regard, the business of the Company is conducted without
the payment of acquisition, disposition or management fees to general partners
which should result in additional cash flow being available for reinvestment. In
addition, unlike investors in opportunity funds, the Company's stockholders will
have voting rights and are expected to have enhanced liquidity through their
ability to sell or margin their stock. The Company also hopes to attract a
broader range of investors because there will be no stipulated investment
minimum. However, unlike REITs and opportunity funds, the Company is subject to
corporate level taxation.

In pursuing the real estate-related opportunities described above, the
Company expects to compete for real estate investments with many public and
private real estate investment vehicles, including financial institutions (such
as mortgage banks, pension funds and REITs) and other institutional investors,
as well as individuals. The real estate industry and the process of identifying,
completing and realizing on real estate investments has from time to time been
highly competitive. In addition, many of those with whom the Company will
compete for investments are far larger than the Company, may have greater
financial resources than the Company and may have management personnel with more
experience than the officers of the Company. See "RISK FACTORS--Difficulty of
Locating Suitable Investments; Competition."

41
<PAGE>

The Company was incorporated under the laws of Delaware on November 17,
1997. The Company's executive offices are located at 16955 Via Del Campo, Suite
100, San Diego, California 92127, and its telephone number is (619) 485-9400.

BUSINESS STRATEGY

The Company intends to pursue a variety of real estate related activities,
including (i) developing long-term, mixed-use development/entertainment projects
that have the potential for substantial capital gains but which may take three
to five years to fully develop, (ii) acquiring single tenant properties that can
be highly leveraged with fixed rate debt that amortizes over the term of the
property's tenant leases, (iii) purchasing portfolios of properties on a
wholesale basis, then selling the properties individually on a retail basis,
(iv) investing in properties requiring significant restructuring or
redevelopment in order to create substantial value, such as changing the use,
tenant mix or focus of a property, and (v) acquiring debt or equity securities
in real estate operating companies, including defaulted debt at a discount to
the value of the underlying asset securing the debt. Further, the Company will
be able to manage the timing of asset dispositions without regard to the minimum
hold periods required of REITs while also acquiring properties using
substantial, yet prudent, leverage to increase returns on what otherwise might
be less attractive investments. Subject to the provisions of the Intercompany
Agreement, pursuant to which the Company must provide Excel with rights to
participate in certain transactions (see "--Intercompany Agreement"), the
Company does not intend to limit its investments in the areas described above to
certain sectors of the real estate market or certain types of properties.

INVESTMENT POLICIES

The Company intends to acquire, develop, own and manage a variety of real
estate-related assets that offer return opportunities that are not generally
available to publicly traded REITs. As opportunities emerge and in response to
changes in market, real estate and general economic conditions, the Company may
in the future retract from, discontinue or expand its real estate related
business and activities.

DEVELOPMENT. The Company may from time to time undertake directly or
through joint venture financing long-term, large development projects that have
the potential for substantial gains but which may take three to five years to
fully develop, with particular emphasis on mixed-use retail entertainment
projects. To the extent the Company provides joint venture financing, the
developer will often bear the substantial portion of the economic risks
associated with the construction, development and initial rent-up of properties.
Under this financing method, the Company either may purchase the undeveloped
property and lease such property back to the developer or make a subordinated
loan to the developer and, upon completion, the Company would have the option to
purchase the development. The Company believes that these financing and
development activities will give the Company opportunities to purchase
properties at capitalization rates slightly above those which might otherwise be
available after completion of development. Since substantial value appreciation
from these investments is not immediately realized, many REITs substantially
limit their development activity. The Company believes that such investments
represent high return opportunities that are underutilized by REITs. For a
detailed discussion of the risks associated with these activities and
investments, see "RISK FACTORS--Risks Associated with Acquisition, Development,
Construction and Renovation Activities."

ACQUIRING SINGLE TENANT PROPERTIES. The Company may from time to time seek
to acquire single tenant properties which can be highly leveraged with fixed
rate debt that amortizes over the term of the property's tenant leases, the
profits from which can be enhanced significantly when property-specific leverage
that carries an interest rate below the capitalization rate on the property is
utilized. Initially, the Company will seek to apply this business strategy to
retail and office properties. As opportunities arise, the Company may seek to
acquire other types of commercial properties, including industrial properties.
For a detailed discussion of the risks associated with these types of activities
and investments, see "RISK FACTORS-- Adverse Consequences of Debt
Financing--Leverage."

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PURCHASING PORTFOLIOS OF PROPERTIES ON A WHOLESALE BASIS. The Company may
from time to time seek to purchase portfolios of properties on a wholesale
basis, then sell such properties individually on a retail basis. The tax
regulations governing REITs discourage such short-term trading activity, causing
a REIT to lose its REIT status if it were to engage excessively in these
activities. Thus, the Company believes that there are abundant short-term
trading opportunities in the real estate markets that are not appropriate for
REITs and are therefore passed over by REITs in favor of other investments.

RESTRUCTURING AND REDEVELOPMENT IN ORDER TO CREATE SUBSTANTIAL VALUE. The
Company may from time to time engage in selective restructuring and development
activities such as changing the use, tenant mix or focus of a property, as
opportunities arise and when justified by expected returns. The Company believes
that by pursuing such selective restructuring and development activities it can
achieve returns which are greater than returns that could be achieved by
acquiring stabilized properties. The Company believes that appropriate, well
located properties which are currently underperforming can be acquired on
advantageous terms and repositioned with the expectation of achieving enhanced
returns that are greater than returns which could be achieved by acquiring a
stabilized property. The Company also believes that these types of properties
are not attractive acquisition candidates for REITs because the properties have
no or limited cash flow as a result of required rehabilitation or not being
substantially leased. As a result, a REIT that is heavily dependent upon
long-term restructuring or redevelopment activities may have difficulty covering
its mandatory dividends. The Company also may acquire land for speculation,
future development or subdivision. For a detailed discussion of the risks
associated with these activities and investments, see "RISK FACTORS--Risks
Associated with Acquisition, Development, Construction and Renovation
Activities."

ACQUIRING DEBT OR EQUITY SECURITIES IN REAL ESTATE OPERATING COMPANIES. The
Company may from time to time acquire real estate related equity securities or
make loans that constitute, or invest in, real estate related senior, junior or
otherwise subordinated debt securities, which debt securities may be unsecured
or secured by liens on real estate or the economic benefits thereof. Some of the
entities in which the Company may invest may be start-up companies or companies
in need of additional capital. These investments may contain options to acquire,
or be convertible into the right to acquire, all or a portion of the underlying
real estate, or contain the right to participate in the cash flow and economic
return which may be derived from the real estate. In determining whether to make
a loan, the Company will consider whether the borrower is willing to grant to
the Company the right to acquire some or all of the underlying real estate
securing such loan, or the right to participate in the cash flow and economic
return which may be derived from such real estate. Only if a borrower is willing
to grant one or more such rights to the Company, and the Company has satisfied
itself after reasonable due diligence that the risks associated with the
proposed loan are acceptable, will the Company be willing to make the loan.

Debt investments may include debt that is acquired at a discount, mezzanine
financing, commercial mortgage-backed securities, secured and unsecured lines of
credit, distressed loans, and loans previously made by foreign and other
financial institutions. In some cases the Company may only acquire a
participating interest in a debt security. The Company believes that there are
opportunities to acquire real estate debt securities, especially in the low or
below investment grade tranches, at significant returns as a result of
inefficiencies in pricing, while utilizing management's real estate expertise to
analyze the underlying properties and thereby effectively minimizing risk. The
Company also may provide credit enhancement or guarantees of the obligations of
others involved in real estate related activities, and may invest in
participating or convertible mortgages if the Company concludes that it may
benefit from the cash flow and/or any appreciation in the value of the property.
Such mortgages may be similar to equity participations. In addition, the Company
may make mortgage loans or participate in such loans and contemporaneously or
otherwise obtain related property purchase options.

Equity investments may include development projects directly or through
joint ventures (as described above), as well as the purchase of general or
limited partnership interests in limited partnerships, shares in publicly traded
or privately held corporations or interests in other entities that own real
estate, make real

43
<PAGE>
estate related loans, invest in real estate related debt instruments or provide
services or products to the real estate industry. The Company intends to engage
in active real estate businesses, which may include land subdivisions, property
sales and other businesses considered ineligible or impractical investments for
REITs. The Company also may hold real estate or interests therein for
investment. The Company may purchase substantially leased, mostly unleased or
vacant properties of any type or geographic location. The Company intends to
renovate and re-lease the mostly unleased or vacant properties. The Company also
may purchase leasehold positions and sub-lease the property.

In addition, the Company may in the future invest in retail, residential,
hotel and other types of properties and manage and lease properties owned by it
or in which it has an equity or debt investment. The activities described above
often do not generate immediate cash flow, and cash flow generated may be
nonrecurring. These investments may be subject to existing debt financing and
any such financing will have a priority over the equity interests of the
Company. For a detailed discussion of the risks associated with these types of
activities and investments, see "RISK FACTORS--Disadvantages of Investments in
Debt Instruments"; "--Disadvantages of Investments in Mortgage Loans";
"--Potential Losses on Investments in Commercial Mortgage-Backed Securities";
and "--Limitations on Remedies."

PROACTIVE ASSET MANAGEMENT

Using real estate information management systems, commercially available
databases and spreadsheets and analyses provided by outside vendors, all of
which are available on a wide area network, the Company's management will
regularly monitor and evaluate each portfolio asset to identify properties which
can be sold or exchanged for optimal sales prices (or exchange values) given
prevailing market conditions and the particular characteristics of each
property. Through this strategy, the Company will seek to continually update its
core property portfolio by disposing of properties which have limited
appreciation potential and redeploy capital into newer properties or properties
where its aggressive management techniques may maximize property values. The
Company may engage from time to time in like-kind property exchanges (I.E., Code
Section 1031 exchanges) which will allow the Company to dispose of properties
and redeploy proceeds in a tax efficient manner. In addition to value
enhancement, the Company also will focus on the efficient management of cash and
maintaining strong operational cost controls.

The Company may utilize the experience of Excel and its nine regional
offices to provide property management for those assets acquired or developed.
By leveraging this franchise, the Company will have access to professional
management that emphasizes maintaining or creating high occupancy rates and
monitoring the physical condition of properties and the financial condition of
tenants.

FINANCING POLICIES

The Company will seek to finance its investments through both public and
private secured and unsecured debt financings, as well as public and private
placements of its equity securities. The equity securities will include both
common and preferred equity issuances of the Company. The Company does not have
a policy limiting the number or amount of mortgages that may be placed on any
particular property, but mortgage financing instruments usually limit additional
indebtedness on such properties. There are currently no restrictions on the
amount of debt that the Company may incur. See "RISK FACTORS--Adverse
Consequences of Debt Financing."

The Company may seek variable rate financing from time to time if such
financing appears advantageous in light of then-prevailing market conditions. In
such case, the Company will consider hedging against interest rate risk through
interest rate protection agreements, interest rate swaps or other means. See
"RISK FACTORS--Hedging Policies/Risks."

The Company does not plan to distribute dividends for the foreseeable
future, which will permit it to accumulate for reinvestment cash flow from
investments, disposition of investments and other business

44
<PAGE>
activities. See "THE DISTRIBUTION--Quotation and Trading of Company Common
Stock; Dividend Policy" and "RISK FACTORS--Dividend Policy."

POLICIES WITH RESPECT TO OTHER ACTIVITIES

The Company does not intend to qualify as a REIT, but it may, from time to
time, invest in REITs and sell properties or entities to REITs for cash and/or
securities. Further, it may spin-off to its common stockholders shares of its
subsidiaries or shares of other entities it has acquired through the sale of its
properties, investments or otherwise. These spin-offs may involve the formation
of new entities and may be taxable or non-taxable, depending upon the facts and
circumstances. The Company's policies with respect to its activities may be
reviewed and modified from time to time by the Company's directors without
notice to or vote of its stockholders. See "RISK FACTORS--Changes in Policies
Without Stockholder Approval."

INTERCOMPANY AGREEMENT

The Company and Excel will enter into the Intercompany Agreement on or prior
to the Distribution Date to provide each other with rights to participate in
certain transactions. Pursuant to the Intercompany Agreement, during the term
thereof, the Company will agree not to engage in activities or make investments
that involve neighborhood and community shopping centers, power centers, malls
or other conventional retail properties (including without limitation the
opportunity to provide services related to such real estate and to invest in
entities that invest primarily in or have a substantial portion of their assets
in such real estate), unless it has first provided written notice to Excel of
the material terms and conditions of such activities or investments, and Excel
has determined not to pursue such activities or investments either by providing
written notice to the Company rejecting the opportunity within ten days
following the date of receipt of notice of the opportunity or by allowing such
ten-day period to lapse. The Intercompany Agreement expressly permits the
Company to engage in activities or make investments that involve office and
industrial properties, single tenant retail properties,
entertainment/retail/mixed-use development projects, real estate mortgages, real
estate derivatives, or entities that invest primarily in or have a substantial
portion of their assets in such real estate assets.

Pursuant to the Intercompany Agreement, during the term thereof, the Company
and Excel also will agree to notify each other of, and make available to each
other, investment opportunities which they develop or of which they become aware
but are unable or unwilling to pursue. The term of the Intercompany Agreement
will commence upon the date of signing and will terminate upon the earlier of
(i) the tenth anniversary of the date of signing, or (ii) a change in control of
either party. See "RISK FACTORS--Possible Conflicts with Excel After the
Distribution" and "RELATIONSHIP BETWEEN LEGACY AND EXCEL AFTER THE
DISTRIBUTION--Policies and Procedures for Addressing Conflicts."

INITIAL CAPITAL AND FINANCING

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<PAGE>

BUSINESS AND PROPERTIES

PROPERTIES

The table below sets forth certain pertinent information regarding the
properties currently owned by the Company and the properties to be transferred
to the Company by Excel and EDV prior to the Distribution. All information is
presented as of December 31, 1997, unless otherwise indicated.

<TABLE>
<CAPTION>
TOTAL BASE
YEAR GLA RENTAL RENT PER LEASE
TENANT BUILT (SQ. FT.) INCOME SQ. FT. EXPIRATION
---------- --------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arizona
Scottsdale Galleria(1)............... (2) (2) (2) (2) (2) (1)
Scottsdale City Centre............... (3) 1982 64,262 $ 1,087,190(4) $ 16.15(5) (6)
Brio Land............................ Brio 1975 3,700 104,314 $ 28.19 2002
Grand Canyon......................... (7) (7) (7) (7) (7) (7)
Colorado
Brighton(1).......................... Wal-Mart 1992 94,220 343,021 3.64 2008
Highlands Ranch(8)................... AMC 1998 110,000 2,413,000 21.94 2018
Telluride Land(8).................... (9) (9) (9) (9) (9) (9)
Westminster(8)....................... AMC 1998 110,000 2,520,000 22.91 2018
Illinois
Orland Hills(1)...................... Wal-Mart 1992 114,513 824,075 7.20 2009
Indiana
Decatur(1)........................... Wal-Mart 1992 72,200 324,200 4.49 2009
Terre Haute(1)....................... Lowe's 1993 104,259 557,786 5.36 2013
Wabash(1)............................ Wal-Mart 1992 93,465 374,604 4.01 2008
Michigan
Big Rapids(1)........................ Wal-Mart 1992 91,440 337,628 3.69 2008
Ohio
Middletown(1)........................ Lowe's 1993 126,400 650,000 5.14 2013
Pennsylvania
Wyomissing(1)........................ Wal-Mart 1992 115,092 679,668 5.91 2008
Texas
Temple(1)............................ Wal-Mart 1992 110,580 629,771 5.70 2008
Wisconsin
Berlin(1)............................ Wal-Mart 1992 59,097 218,017 3.69 2009
---------- ------------- -----------
Total..................................................... 1,269,228 $ 11,063,274 $ 8.71
---------- ------------- -----------
---------- ------------- -----------
</TABLE>

- --------------------------

(1) To be transferred to the Company as part of the Excel Legacy Corporation
Asset Group.

(2) Property currently under renovation.

(3) Major tenants include Allied Waste Industries, Inc., RAS Management, Inc.
and Commerce International R.E.I.

(4) As of November 15, 1997.

(5) Average as of November 15, 1997.

(6) Lease terms average two years.

(7) Property consists of 6.5 acres of land and is currently being redeveloped.

(8) Owned by the Company prior to the Distribution. The Highlands Ranch and
Westminster properties were acquired by the Company on January 13, 1998. The
Telluride property was acquired by the Company on January 27, 1998.

(9) Property consists of 0.25 acres of land and is currently being redeveloped.

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<PAGE>
SCOTTSDALE GALLERIA

In September 1993, Excel acquired the Scottsdale Galleria (the "Scottsdale
Galleria"). The Scottsdale Galleria is situated on approximately 6.3 acres and
consists of (i) an enclosed shopping mall contained in two separate buildings,
and (ii) a multi-level parking garage. The buildings and the parking garage are
connected by a pedestrian bridge. The main building (the "Atrium") is a four
level building with a transparent glass roof and has approximately 414,768
square feet of GLA. The smaller building contains the "5th Avenue Shops" and has
approximately 105,713 square feet of GLA.

The Scottsdale Galleria is located in the designated Waterfront
Redevelopment District, a high priority project for the City of Scottsdale which
will utilize the Arizona Canal as the main focal point with landscaped banks,
benches, walkways, bridges and stores lining the canal banks similar to San
Antonio's "Riverwalk." Other major points of interest in the area include the
Center for Performing Arts, Scottsdale Civic Center, Scottsdale Memorial
Hospital, Stetson Square, Scottsdale Fashion Square, Camelview Plaza and
Scottsdale Stadium (spring training home to the San Francisco Giants and their
affiliated Triple A farm club). The area is typified by single family
residences, hotels, commercial and multi-family uses and is going through a
growth and renovation cycle, of which the Waterfront Redevelopment District is
an integral part, with the older retail uses being remodeled as well as new
growth in the retail and apartment segments of the market. The City of
Scottsdale has issued a request for proposals ("RFP") for the redevelopment of
this area. Excel was granted the RFP and the right to redevelop this area, which
will be transferred to the Company along with the Scottsdale Galleria.

Excel purchased the Scottsdale Galleria for approximately $6.0 million in
connection with a foreclosure of the property. The estimated fair market value
of the Scottsdale Galleria is approximately $25.0 million. The Scottsdale
Galleria has been the subject of various development plans since Excel's
acquisition of the property, none of which has been financially feasible. In
connection with these previous development activities, most of the existing
tenant improvements and interior common area improvements were removed and sold.
Therefore, the majority of the Scottsdale Galleria's interior will need to be
re-improved in connection with any redevelopment of the property.

SCOTTSDALE CITY CENTRE

In September 1997, EDV acquired the Scottsdale City Centre, a 64,262 square
foot office building situated on approximately 2.5 acres in Scottsdale, Arizona
(the "City Centre"). The City Centre was purchased as an expansion site for the
RFP associated with the Waterfront Redevelopment District and the Scottsdale
Galleria.

The purchase price for the City Centre was approximately $7.7 million.
Approximately $5.1 million of the purchase price was paid in cash, and EDV
assumed a loan with approximately $2.6 million in outstanding principal (the
"City Centre Loan"). The City Centre Loan bears interest at the rate of 8.125%
per annum and matures in February 2006. Any prepayment during the fourth through
eighth years of the City Centre Loan must be accompanied by a prepayment premium
equal to a percentage of the amount being prepaid, which percentage equals 5.0%
in the fourth year and decreases by 1.0% each year thereafter to a minimum 1.0%
prepayment premium. No prepayment premium must be paid during the final three
months of the loan. EDV also may prepay up to 10.0% (on a non-cumulative basis)
of the outstanding principal balance of the loan each year on the due date of
any monthly payment without incurring a prepayment premium. The City Centre Loan
must be repaid if the City Centre is sold.

The City Centre Loan is non-recourse and repayment of the loan by EDV is
secured by a first mortgage on the City Centre and an assignment of EDV's rights
in the leases in effect for the tenants of the City Centre.

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<PAGE>
BRIO LAND

In November 1997, EDV acquired approximately 0.5 acres of land located in
Scottsdale, Arizona (the "Brio Land"). The Brio Land was purchased as an
expansion site for the RFP associated with the Waterfront Redevelopment District
and the Scottsdale Galleria. The Brio Land currently contains a 3,700 square
foot building which is leased to the Brio Restaurant. The Brio Restaurant's
annual rent is approximately $104,000, under a lease that expires in May 2002.
The seller originally entered into a purchase contract to sell the Brio Land to
Emerald Equities, L.L.C. for approximately $1.6 million. EDV subsequently
acquired Emerald Equities' interest in the purchase contract for $100,000. The
total purchase price paid by EDV for the Brio Land thus totalled approximately
$1.7 million, all of which was paid in cash.

GRAND CANYON PROPERTY

In November 1997, Excel acquired a leasehold interest in approximately 6.5
acres of land located in Tusayan, Arizona at the entrance to Grand Canyon
National Park on the South Rim (the "Grand Canyon Property") for approximately
$1.8 million. The Grand Canyon Property currently contains a building which will
be demolished and is subject to a lease which will be terminated and replaced
with a new land lease (the "New Lease") with a term of 50 years and two ten year
renewal options. The New Lease encompasses both the Grand Canyon Property and an
adjacent parcel consisting of approximately 3.5 acres currently owned by Red
Feather Properties Limited Partnership. Red Feather Properties Limited
Partnership and the Company intend to form a joint venture to enter into the New
Lease.

BRIGHTON, COLORADO

In December 1992, Excel acquired a 94,220 square foot building situated on
approximately 12.8 acres in Brighton, Colorado (the "Brighton Property").

The Brighton Property is a single free-standing building occupied by
Wal-Mart. Wal-Mart's annual rent is approximately $343,000, under a lease that
expires in January 2008. Wal-Mart's lease is a triple net lease and all property
taxes on the Brighton Property are paid by Wal-Mart. Wal-Mart has an option to
extend the term of the lease for seven consecutive periods of five years each at
an annual rent of approximately $200,000. During the option terms, in addition
to the annual rent as described above, Wal-Mart will pay to Excel a percentage
rent equal to 1.0% of the amount by which Wal-Mart's gross sales at the Brighton
Property exceed $590 per square foot of the store building under roof.

Wal-Mart has a right of first refusal to purchase the Brighton Property from
Excel if Excel receives an "acceptable bona fide offer to buy" or if Excel
offers to sell the property on the terms of such offer.

The purchase price for the Brighton Property was approximately $3.6 million.
Approximately $500,000 of the purchase price was paid in cash, and Excel assumed
a loan with approximately $3.0 million in outstanding principal (the "Brighton
Loan"). As part of the purchase price, Excel also issued shares of Excel Common
Stock with an aggregate value of approximately $103,000. The Brighton Loan is
self-amortizing, bears interest at the rate of 7.1595% per annum and matures in
January 2008. The Brighton Loan is prepayable only in full and then only after
April 10, 2000, and must be repaid if the Brighton Property is sold. Under
certain circumstances, prepayment of the loan must be accompanied by a yield
maintenance payment.

The Brighton Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Brighton Property and an assignment of
Excel's rights in the Wal-Mart lease.

HIGHLANDS RANCH AND WESTMINSTER, COLORADO

In January 1998, the Company acquired two properties currently under
construction situated on approximately 43.6 acres in Highlands Ranch and
Westminster, Colorado.

48
<PAGE>

The acquired properties consist of two 110,000 square foot 24 screen movie
theaters, which are expected to be completed in February 1998. The Highlands
Ranch theater will contain 4,850 seats and the Westminster theater will contain
5,100 seats. Both properties are occupied by AMC. The leases are guaranteed by
AMC's parent corporation, AMC Entertainment, Inc. Each of the leases are for a
20-year term. For the first ten years of the lease terms, AMC's annual rent is
approximately $2.4 million for the Highlands Ranch theater and $2.5 million for
the Westminster theater. For the eleventh through fifteenth years of the lease
terms, AMC's annual rent is approximately $2.7 million for the Highlands Ranch
theater and $2.8 million for the Westminster theater. For the final five years
of the lease terms, AMC's annual rent is approximately $2.9 million for the
Highlands Ranch theater and $3.0 million for the Westminster theater. The AMC
leases are triple net leases and all property taxes on the Highlands Ranch and
Westminster properties are paid by AMC. AMC has an option to extend the term of
each lease for six consecutive periods of five years. The annual rent will
increase by approximately $300,000 to $400,000 for each option term from
approximately $3.2 million during the first option term to $5.2 million during
the sixth option term for the Highlands Ranch theater and from approximately
$3.4 million during the first option term to $5.4 million during the sixth
option term for the Westminster theater. Rent under the leases is set to
commence by March 15, 1998.

The purchase price for the theaters was approximately $49.9 million.
Approximately $19.9 million of the purchase price was paid from the proceeds of
a 90-day loan that matures on March 25, 1998 and bears interest at the rate of
LIBOR plus 1.2% per annum. As part of the purchase price, Excel also posted two
letters of credit with an aggregate face value of $30.0 million, from which AMC
will draw funds for construction of the theaters. The letters of credit cover
the remaining construction allowance due to AMC from the seller of the
properties. The letters of credit expire on March 25, 1998 and must be fully
repaid by the Company at that time. Any change orders or overages which would
result in construction costs above the face amount of the letters of credit are
the responsibility of AMC.

TELLURIDE, COLORADO

In January 1998, the Company acquired approximately 0.25 acres of land
located at the base of Telluride mountain in Telluride Mountain Village Ski
Resort in Telluride, Colorado for approximately $760,000. The Company intends to
develop a "ski-in" condominium development comprised of 23 units on the
property. The construction of the project will require a $6.0 million
construction loan and is expected to be completed during the summer of 1999.

ORLAND HILLS, ILLINOIS

In March 1993, Excel acquired a 114,513 square foot building situated on
approximately 11.9 acres in Orland Hills, Illinois (the "Orland Hills
Property").

The Orland Hills Property is a single free-standing building occupied by
Wal-Mart. Wal-Mart's annual rent is approximately $824,000, under a lease that
expires in January 2009. Wal-Mart's lease is a triple net lease and all property
taxes on the Orland Hills Property are paid by Wal-Mart. Wal-Mart has an option
to extend the term of the lease for seven consecutive periods of five years each
at an annual rent of approximately $490,000. During the option terms, in
addition to the annual rent as described above, Wal-Mart will pay to Excel a
percentage rent equal to 1.0% of the amount by which Wal-Mart's gross sales at
the Orland Hills Property exceed $590 per square foot of the store building
under roof.

Wal-Mart has a right of first refusal to purchase the Orland Hills Property
from Excel if Excel receives an "acceptable bona fide offer to buy" or if Excel
offers to sell the property on the terms of such offer.

The purchase price for the Orland Hills Property was $8.8 million.
Approximately $1.2 million of the purchase price was paid in cash, and Excel
assumed approximately $7.3 million in existing bond financing which was obtained
through the sale of investment grade rated commercial mortgage pass-through
certificates in a real estate mortgage investment conduit ("REMIC") (the "Orland
Hills Loan"). As part of

49
<PAGE>
the purchase price, Excel also issued shares of Excel Common Stock with an
aggregate value of approximately $300,000. The notes representing the Orland
Hills Loan bear interest at different rates that equate to a weighted average
interest rate of approximately 8.18% per annum. The Orland Hills Loan is
self-amortizing and matures in January 2009. The Orland Hills Loan is prepayable
only in full and must be repaid if the Orland Hills Property is sold. Under
certain circumstances, prepayment of the loan must be accompanied by a yield
maintenance payment, which will be no greater than 1.0% of the outstanding
principal amount of the Orland Hills Loan at the time of prepayment.

The Orland Hills Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Orland Hills Property and an assignment of
Excel's rights in the Wal-Mart lease.

DECATUR, INDIANA

In December 1992, Excel acquired a 72,200 square foot building situated on
approximately 11.4 acres in Decatur, Indiana (the "Decatur Property").

The Decatur Property is a single free-standing building occupied by
Wal-Mart. Wal-Mart's annual rent is approximately $324,000, under a lease that
expires in January 2009. Wal-Mart's lease is a triple net lease and all property
taxes on the Decatur Property are paid by Wal-Mart. Wal-Mart has an option to
extend the term of the lease for seven consecutive periods of five years each at
an annual rent of approximately $190,000. During the option terms, in addition
to the annual rent as described above, Wal-Mart will pay to Excel a percentage
rent equal to 1.0% of the amount by which Wal-Mart's gross sales at the Decatur
Property exceed $590 per square foot of the store building under roof.

Wal-Mart has a right of first refusal to purchase the Decatur Property from
Excel if Excel receives an "acceptable bona fide offer to buy" or if Excel
offers to sell the property on the terms of such offer.

The purchase price for the Decatur Property was $3.4 million. Approximately
$400,000 of the purchase price was paid in cash, and Excel assumed approximately
$2.9 million in existing bond financing which was obtained through the sale of
investment grade rated commercial mortgage pass-through certificates in a REMIC
(the "Decatur Loan"). As part of the purchase price, Excel also issued shares of
Excel Common Stock with an aggregate value of approximately $100,000. The notes
representing the Decatur Loan bear interest at different rates that equate to a
weighted average interest rate of approximately 8.18% per annum. The Decatur
Loan is self-amortizing and matures in January 2009. The Decatur Loan is
prepayable only in full and must be repaid if the Decatur Property is sold.
Under certain circumstances, prepayment of the loan must be accompanied by a
yield maintenance payment, which will be no greater than 1.0% of the outstanding
principal amount of the Decatur Loan at the time of prepayment.

The Decatur Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Decatur Property and an assignment of Excel's
rights in the Wal-Mart lease.

TERRE HAUTE, INDIANA

In June 1993, Excel acquired a 104,259 square foot building situated on
approximately 10.8 acres in Terre Haute, Indiana (the "Terre Haute Property").

The Terre Haute Property is a single free-standing building occupied by
Lowe's. Lowe's annual rent is approximately $557,000, under a lease that expires
in January 2013. Lowe's lease is a triple net lease and all property taxes on
the Terre Haute Property are paid by Lowe's. Lowe's has an option to extend the
term of the lease for six consecutive periods of five years each. During the
first two option terms, the annual rent will be approximately $586,000. During
the third and fourth option terms, the annual rent will be approximately
$615,000. During the final two option terms, the annual rent will be
approximately $646,000. During the option terms, in addition to the annual rent
as described above, Lowe's will pay to Excel a percentage rent equal to 1.0% of
Lowe's gross sales at the Terre Haute Property between $55.8 million and

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<PAGE>
$65.8 million and 0.5% of Lowe's gross sales at the Terre Haute Property in
excess of $65.8 million. The percentages set forth above as well as the
thresholds are subject to upward adjustment in accordance with any increases in
rent during the option terms.

The purchase price for the Terre Haute Property was approximately $5.3
million. Approximately $1.0 million of the purchase price was paid in cash, and
Excel assumed a loan with approximately $4.0 million in outstanding principal
(the "Terre Haute Loan"). As part of the purchase price, Excel also issued
shares of Excel Common Stock with an aggregate value of approximately $300,000.
The Terre Haute Loan bears interest at the rate of 8.75% per annum and matures
in June 2003. The Terre Haute Loan must be repaid if the Terre Haute Property is
sold. Any prepayment during the sixth through ninth years of the Terre Haute
Loan must be accompanied by a prepayment premium equal to a percentage of the
amount being prepaid, which percentage equals 5.0% in the sixth year and
decreases by 1.0% each year thereafter. No prepayment premium must be paid
during the final three months of the loan.

The Terre Haute Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Terre Haute Property and an assignment of
Excel's rights in the Lowe's lease.

WABASH, INDIANA

In December 1992, Excel acquired a 93,465 square foot building situated on
approximately 10.9 acres in Wabash, Indiana (the "Wabash Property").

The Wabash Property is a single free-standing building occupied by Wal-Mart.
Wal-Mart's annual rent is approximately $375,000, under a lease that expires in
January 2008. Wal-Mart's lease is a triple net lease and all property taxes on
the Wabash Property are paid by Wal-Mart. Wal-Mart has an option to extend the
term of the lease for seven consecutive periods of five years each at an annual
rent of approximately $220,000. During the option terms, in addition to the
annual rent as described above, Wal-Mart will pay to Excel a percentage rent
equal to 1.0% of the amount by which Wal-Mart's gross sales at the Wabash
Property exceed $590 per square foot of the store building under roof.

Wal-Mart has a right of first refusal to purchase the Wabash Property from
Excel if Excel receives an "acceptable bona fide offer to buy" or if Excel
offers to sell the property on the terms of such offer.

The purchase price for the Wabash Property was $3.9 million. Approximately
$200,000 of the purchase price was paid in cash, and Excel assumed a loan with
approximately $3.7 million in outstanding principal (the "Wabash Loan"). The
Wabash Loan bears interest at the rate of 7.1595% per annum and matures in
January 2008. The Wabash Loan is prepayable only in full and then only after
April 10, 2000, and must be repaid if the Wabash Property is sold. Under certain
circumstances, prepayment of the loan must be accompanied by a yield maintenance
payment.

The Wabash Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Wabash Property and an assignment of Excel's
rights in the Wal-Mart lease.

BIG RAPIDS, MICHIGAN

In December 1992, Excel acquired a 91,440 square foot building situated on
approximately 17.1 acres in Big Rapids, Michigan (the "Big Rapids Property").

The Big Rapids Property is a single free-standing building occupied by
Wal-Mart. Wal-Mart's annual rent is approximately $338,000, under a lease that
expires in January 2008. Wal-Mart's lease is a triple net lease and all property
taxes on the Big Rapids Property are paid by Wal-Mart. Wal-Mart has an option to
extend the term of the lease for seven consecutive periods of five years each at
an annual rent of approximately $200,000. During the option terms, in addition
to the annual rent as described above, Wal-Mart will pay to Excel a percentage
rent equal to 1.0% of the amount by which Wal-Mart's gross sales at the Big
Rapids Property exceed $590 per square foot of the store building under roof.

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Wal-Mart has a right of first refusal to purchase the Big Rapids Property
from Excel if Excel receives an "acceptable bona fide offer to buy" or if Excel
offers to sell the property on the terms of such offer.

The purchase price for the Big Rapids Property was approximately $3.5
million. The purchase price included no cash. Excel assumed a loan with
approximately $3.4 million in outstanding principal (the "Big Rapids Loan"). As
part of the purchase price, Excel also issued shares of Excel Common Stock with
an aggregate value of approximately $100,000. The Big Rapids Loan bears interest
at the rate of 7.1595% per annum and matures in January 2008. The Big Rapids
Loan is prepayable only in full and then only after April 10, 2000, and must be
repaid if the Big Rapids Property is sold. Under certain circumstances,
prepayment of the loan must be accompanied by a yield maintenance payment.

The Big Rapids Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Big Rapids Property and an assignment of
Excel's rights in the Wal-Mart lease.

MIDDLETOWN, OHIO

In February 1994, Excel acquired a 126,400 square foot building situated on
approximately 15.7 acres in Middletown, Ohio (the "Middletown Property").

The Middletown Property is a single free-standing building occupied by
Lowe's. Lowe's annual rent is approximately $650,000, under a lease that expires
in January 2013. Lowe's lease is a triple net lease and all property taxes on
the Middletown Property are paid by Lowe's. Lowe's has an option to extend the
term of the lease for six consecutive periods of five years each. During the
first two option terms, the annual rent will be approximately $715,000. During
the third and fourth option terms, the annual rent will be approximately
$750,000. During the final two option terms, the annual rent will be
approximately $790,000. During the option terms, in addition to the annual rent
as described above, Lowe's will pay to Excel a percentage rent equal to 1.0% of
Lowe's gross sales at the Middletown Property between $65.0 million and $75.0
million and 0.5% of Lowe's gross sales at the Middletown Property in excess of
$75.0 million. The percentages set forth above as well as the thresholds are
subject to upward adjustment in accordance with any increases in rent during the
option terms.

The purchase price for the Middletown Property was approximately $6.2
million. Approximately $1.5 million of the purchase price was paid in cash, and
Excel assumed a loan with approximately $4.4 million in outstanding principal
(the "Middletown Loan"). As part of the purchase price, Excel also issued shares
of Excel Common Stock with an aggregate value of approximately $300,000. The
Middletown Loan bears interest at the rate of 7.625% per annum and matures in
March 2014. The Middletown Loan is prepayable only in full and then only after
April 1, 1999, and must be repaid if the Middletown Property is sold. Under
certain circumstances, prepayment of the loan must be accompanied by a yield
maintenance payment, which will be no greater than 1.0% of the outstanding
principal amount of the Middletown Loan at the time of prepayment. No prepayment
premium must be paid after July 2013.

The Middletown Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Middletown Property and an assignment of
Excel's rights in the Lowe's lease.

WYOMISSING, PENNSYLVANIA

In December 1992, Excel acquired a 115,092 square foot building situated on
approximately 3.5 acres in Wyomissing, Pennsylvania (the "Wyomissing Property").

The Wyomissing Property is a single free-standing building occupied by
Wal-Mart. Wal-Mart's annual rent is approximately $680,000, under a lease that
expires in January 2008. Wal-Mart's lease is a triple net lease and all property
taxes on the Wyomissing Property are paid by Wal-Mart. Wal-Mart has an option to
extend the term of the lease for seven consecutive periods of five years each at
an annual rent of approximately $400,000. During the option terms, in addition
to the annual rent as described above, Wal-

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<PAGE>
Mart will pay to Excel a percentage rent equal to 1.0% of the amount by which
Wal-Mart's gross sales at the Wyomissing Property exceed $590 per square foot of
the store building under roof.

Wal-Mart has a right of first refusal to purchase the Wyomissing Property
from Excel if Excel receives an "acceptable bona fide offer to buy" or if Excel
offers to sell the property on the terms of such offer.

The purchase price for the Wyomissing Property was approximately $7.1
million. Approximately $100,000 of the purchase price was paid in cash, and
Excel assumed a loan with approximately $6.8 million in outstanding principal
(the "Wyomissing Loan"). As part of the purchase price, Excel also issued shares
of Excel Common Stock with an aggregate value of approximately $200,000. The
Wyomissing Loan bears interest at the rate of 7.9195% per annum and matures in
January 2008. The Wyomissing Loan is prepayable only in full and then only after
April 10, 2000, and must be repaid if the Wyomissing Property is sold. Under
certain circumstances, prepayment of the loan must be accompanied by a yield
maintenance payment.

The Wyomissing Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Wyomissing Property and an assignment of
Excel's rights in the Wal-Mart lease.

TEMPLE, TEXAS

In December 1992, Excel acquired a 110,580 square foot building situated on
approximately 16.5 acres in Temple, Texas (the "Temple Property").

The Temple Property is a single free-standing building occupied by Wal-Mart.
Wal-Mart's annual rent is approximately $630,000, under a lease that expires in
January 2008. Wal-Mart's lease is a triple net lease and all property taxes on
the Temple Property are paid by Wal-Mart. Wal-Mart has an option to extend the
term of the lease for seven consecutive periods of five years each at an annual
rent of approximately $370,000. During the option terms, in addition to the
annual rent as described above, Wal-Mart will pay to Excel a percentage rent
equal to 1.0% of the amount by which Wal-Mart's gross sales at the Temple
Property exceed $590 per square foot of the store building under roof.

Wal-Mart has a right of first refusal to purchase the Temple Property from
Excel if Excel receives an "acceptable bona fide offer to buy" or if Excel
offers to sell the property on the terms of such offer.

The purchase price for the Temple Property was approximately $5.8 million.
None of the purchase price was paid in cash. Excel assumed a loan with
approximately $5.6 million in outstanding principal (the "Temple Loan"). As part
of the purchase price, Excel also issued shares of Excel Common Stock with an
aggregate value of approximately $200,000. The Temple Loan bears interest at the
rate of 7.1595% per annum and matures in January 2008. The Temple Loan is
prepayable only in full and then only after April 10, 2000, and must be repaid
if the Temple Property is sold. Under certain circumstances, prepayment of the
loan must be accompanied by a yield maintenance payment.

The Temple Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Temple Property and an assignment of Excel's
rights in the Wal-Mart lease.

BERLIN, WISCONSIN

In December 1992, Excel acquired a 59,097 square foot building situated on
approximately 7.6 acres in Berlin, Wisconsin (the "Berlin Property).

The Berlin Property is a single free-standing building occupied by Wal-Mart.
Wal-Mart's annual rent is approximately $220,000, under a lease that expires in
January 2009. Wal-Mart's lease is a triple net lease and all property taxes on
the Berlin property are paid by Wal-Mart. Wal-Mart has an option to extend the
term of the lease for seven consecutive periods of five years each at an annual
rent of approximately $130,000. During the option terms, in addition to the
annual rent as described above, Wal-Mart will pay to

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<PAGE>
Excel a percentage rent equal to 1.0% of the amount by which Wal-Mart's gross
sales at the Berlin Property exceed $590 per square foot of the store building
under roof.

Wal-Mart has a right of first refusal to purchase the Berlin Property from
Excel if Excel receives an "acceptable bona fide offer to buy" or if Excel
offers to sell the property on the terms of such offer.

The purchase price for the Berlin Property was approximately $2.3 million.
None of the purchase price was paid in cash. Excel assumed approximately $2.2
million in existing bond financing which was obtained through the sale of
investment grade rated commercial mortgage pass-through certificates in a REMIC
(the "Berlin Loan"). As part of the purchase price, Excel also issued shares of
Excel Common Stock with an aggregate value of approximately $100,000. The notes
representing the Berlin Loan bear interest at different rates that equate to a
weighted average interest rate of approximately 8.18% per annum. The Berlin Loan
is self-amortizing and matures in January 2009. The Berlin Loan is prepayable
only in full and must be repaid if the Berlin Property is sold. Under certain
circumstances, prepayment of the loan must be accompanied by a yield maintenance
payment, which will be no greater than 1.0% of the outstanding principal amount
of the Berlin Loan at the time of prepayment.

The Berlin Loan is non-recourse and repayment of the loan by Excel is
secured by a first mortgage on the Berlin Property and an assignment of Excel's
rights in the Wal-Mart lease.

NOTES RECEIVABLE

LOS ARCOS LOAN

EDV holds a $22.8 million promissory note (the "Los Arcos Loan") payable by
Los Arcos Development, LLC, the owner of a 700,000 square foot indoor regional
mall located in Scottsdale, Arizona. The borrower intends to redevelop the
property through the acquisition of adjoining parcels and the construction of
certain improvements. The City of Scottsdale has issued an RFP for the
redevelopment of this area. Los Arcos Development, LLC was granted the RFP and
the right to redevelop this area, which will be transferred to the Company along
with the Los Arcos Loan. The note secures a three-year revolving line of credit.
As of December 31, 1997, approximately $16.2 million was outstanding under the
Los Arcos Loan, plus accrued interest of approximately $1.9 million. The Los
Arcos Loan was originated in December 1996 and matures on the earlier of (i) the
sale of the property and (ii) December 19, 2003. Interest on outstanding amounts
under the Los Arcos Loan accrues at the rate of 12.0% per annum until December
19, 1998. From and after such date, all amounts outstanding and interest accrued
thereon will accrue and be compounded annually. Accrued interest on the Los
Arcos Loan becomes payable out of the property's net cash flow once the
borrower's development of the property is completed. Interest not paid out of
current net cash flow will continue to accrue.

Until the maturity date, EDV is entitled to receive a "profits
participation" equal to 50.0% of the net proceeds of any sale of the borrower's
ownership interest in the property less any senior encumbrances, amounts due
under the Los Arcos Loan and other costs and expenses incidental to the
disposition of the property. Such proceeds will be adjusted upward for any net
income from operations and downward for any net loss from operations during the
term of the Los Arcos Loan.

In connection with the Los Arcos Loan, EDV has the right of prior approval
with respect to (i) the decision to purchase any adjacent parcels, (ii) leases
in excess of 25,000 square feet, (iii) the final development plan for the
property, (iv) decisions concerning major project financing, (v) the form of any
subordination agreement affecting the Los Arcos Loan, and (vi) the development
agreement with the City of Scottsdale.

The Los Arcos Loan is non-recourse and repayment of the loan is secured by a
first mortgage on the property, which mortgage may be subordinated to future
lenders providing construction or interim financing in connection with the
redevelopment or operation of the property. The Los Arcos Loan may be prepaid in
whole or in part at any time and must be repaid if the property is sold.

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In connection with the Los Arcos Loan, the borrower has provided EDV with an
indemnification against any and all claims arising out of the presence of
hazardous substances on the property.

EDV has an option to require the borrower to sell or refinance the property
at any time from December 19, 2001 through June 19, 2002, and to be paid its
profits participation out of the proceeds of such sale or refinancing.

FIRST STREET LOAN

EDV holds a $4.8 million promissory note (the "First Street Loan") payable
by First Street Investments Limited Partnership, the owner of a 120,000 square
foot, eight story office building located in downtown Phoenix, Arizona. The note
secures a three-year revolving line of credit. As of December 31, 1997,
approximately $4.5 million was outstanding under the First Street Loan,
including accrued interest of approximately $200,000. The First Street Loan was
originated in May 1997 and matures on the earlier of (i) the sale of the
property and (ii) May 28, 2004. Until the maturity date, the borrower is to pay
interest only on all amounts outstanding under the First Street Loan at the rate
of 11.0% per annum. Interest not paid currently will accrue at the rate of 12.0%
per annum until May 28, 1999. From and after such date, interest will accrue and
be compounded annually.

Until the maturity date, EDV is entitled to receive a "profits
participation" equal to 50.0% of the net proceeds of any sale of the borrower's
ownership interest in the property less any senior encumbrances, amounts due
under the First Street Loan and other costs and expenses incidental to the
disposition of the property. Such proceeds will be adjusted upward for any net
income from operations and downward for any net loss from operations during the
term of the First Street Loan.

The First Street Loan is non-recourse and repayment of the loan is secured
by a subordinated mortgage on the property. The First Street Loan may be prepaid
in whole or in part at any time and must be repaid if the property is sold.

In connection with the First Street Loan, the borrower has provided EDV with
an indemnification against any and all claims arising out of the presence of
hazardous substances on the property.

EDV has an option to require the borrower to sell or refinance the property
at any time from May 28, 2002 through November 28, 2002, and to be paid its
profits participation out of the proceeds of such sale or refinancing.

GRAND CANYON LOAN

EDV holds a $1.1 million promissory note (the "Grand Canyon Loan") payable
by Fain Properties Limited Partnership, the owner of approximately 17 acres of
undeveloped land located in Tusayan, Arizona on the South Rim of Grand Canyon
National Park. The Grand Canyon Loan was originated in October 1995 and matures
in September 1998. Until the maturity date, the borrower is to pay interest only
at the rate of 7.0% per annum. In addition, upon the maturity, prepayment or
acceleration of the Grand Canyon Loan, the borrower also must pay additional
interest from October 1995 on the principal amount of the Grand Canyon Loan at
the rate of 3.0% per annum. The Grand Canyon Loan is non-recourse and repayment
of the loan is secured by a first mortgage on the property. The Grand Canyon
Loan must be repaid if the property is sold. The borrower intends to use the
proceeds from the Grand Canyon Loan to develop a hotel and a retail
entertainment shopping center on the property, in which the Company would have a
percentage ownership upon completion. As of December 31, 1997, accrued interest
on the Grand Canyon Loan was approximately $114,000.

SEAPORT VILLAGE/HARBOR VENTURES LOAN

EDV holds a $2.5 million promissory note (the "Seaport Village Loan")
payable by Russell B. Geyser securing a revolving line of credit. As of December
31, 1997, approximately $226,000 was outstanding

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<PAGE>
under the Seaport Village Loan. The Seaport Village Loan was originated in June
1997 and matures in December 1998, subject to extension at Mr. Geyser's option
until June 1999, at which time the principal amount and all interest accrued
thereon at the rate of 12.0% per annum will be due and payable. Until the
maturity date, Mr. Geyser is not required to make any payments to EDV with
respect to the Seaport Village Loan. All amounts advanced and outstanding under
the Seaport Village Loan bear interest at the rate of 12.0% per annum. On June
5, 1998, all accrued but unpaid interest will be added to the principal amount
outstanding under the loan as of that date.

Funds drawn under the Seaport Village Loan may be used solely for earnest
money deposits and option payments on projects approved by EDV as being of a
type for which EDV would be willing to provide equity capital and for
pre-development expenses in connection with the expansion of Seaport Village, a
retail entertainment shopping center located on San Diego harbor in downtown San
Diego, California.

Repayment of the Seaport Village Loan is secured by Mr. Geyser's entire
membership or partnership interest, as applicable, in certain joint venture
entities, including Harbor Ventures, LLC, the joint venture entity through which
Mr. Geyser is participating in the development of Seaport Village. Mr. Geyser
has agreed to provide EDV with a security interest in any future joint venture
entity in which Mr. Geyser has an interest where such entity receives capital by
way of loan, equity investment or land lease from EDV or its affiliates. Mr.
Geyser has agreed at all times to maintain combined fair market value equity in
each entity in which EDV has a security interest equivalent to 1.5 dollars of
equity for every one dollar advanced under the Seaport Village Loan. In the
event the foregoing test is not satisfied at any time, Mr. Geyser must pledge
additional collateral acceptable to EDV or repay a portion of the principal
outstanding in order to regain compliance.

PRINCIPAL TENANTS

As of the Distribution Date, AMC will be the Company's largest tenant,
representing approximately 45.2% of the Company's total revenue (approximately
17.4% of its GLA) as of such date. AMC's parent corporation, AMC Entertainment,
Inc., has guaranteed the leases on the Highlands Ranch and Westminster
properties under which AMC is the tenant. AMC Entertainment, Inc. is a motion
picture exhibitor and operates approximately 230 theaters (containing
approximately 1,960 screens) primarily in California, Florida, Michigan,
Missouri, Pennsylvania and Texas. AMC Entertainment, Inc. also owns theaters in
Japan and Portugal. AMC Entertainment, Inc. is listed on the American Stock
Exchange.

As of the Distribution Date, Wal-Mart will be the Company's second largest
tenant, representing approximately 34.2% of the Company's total revenue
(approximately 59.3% of its GLA) as of such date. Wal-Mart is the nation's
largest retailer and operates approximately 2,000 discount department stores and
over 400 warehouse clubs. Wal-Mart is listed on the New York Stock Exchange and,
as of December 1997, had credit ratings of AA from Standard & Poor's Corporation
("Standard & Poor's") and Aa1-Aa2 from Moody's Investors Service, Inc.
("Moody's").

As of the Distribution Date, Lowe's will be the Company's third largest
tenant, representing approximately 11.1% of the Company's total revenue
(approximately 18.2% of its GLA) as of such date. Lowe's is owned by Lowe's
Companies, Inc., the nation's second largest home improvement retailer with over
400 stores. Lowe's Companies, Inc. is listed on the New York Stock Exchange and,
as of December 1997, had credit ratings of A and A2 from Standard & Poor's and
Moody's, respectively. See "RISK FACTORS--Reliance on Major Tenants."

ENVIRONMENTAL MATTERS

Pursuant to the Distribution Agreement, the Company will agree to indemnify
Excel and EDV for all liabilities arising out of their prior ownership of the
properties and notes receivable described above. The

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Company's ownership of such properties and notes receivable and its agreement to
indemnify Excel and EDV could subject it to certain environmental liabilities.

Under various Federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
These laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The cost of any required remediation and the owner's liability
therefor as to any property is generally not limited under such enactments and
could exceed the value of the property and/or the aggregate assets of the owner.
The presence of such substances, or the failure to properly remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. Persons who arrange for
the disposal or treatment of hazardous or toxic substances also may be liable
for the costs of removal or remediation of such substances at a disposal or
treatment facility, whether or not such facility is owned or operated by such
persons. Certain environmental laws govern the removal, encapsulation or
disturbance of ACMs when such materials are in poor condition, or in the event
of renovation or demolition. Such laws impose liability for release of ACMs into
the air and third parties may seek recovery from owners or operators of real
properties for personal injury associated with ACMs. The operation and
subsequent removal of certain underground storage tanks also are regulated by
Federal and state laws.

Each of the properties being transferred to the Company prior to the
Distribution has undergone a Phase I assessment (involving investigation without
soil sampling or groundwater analysis) by environmental consultants. The Company
is unaware of any environmental liability or noncompliance with applicable
environmental laws or regulations arising out of such properties that the
Company believes would have a material adverse effect on its business, assets or
results of operations. Nonetheless, there can be no assurance that the Company's
knowledge is complete with regard to, or that the Phase I assessments have
identified, all material environmental liabilities. See "RISK FACTORS--Potential
Environmental Liability Related to the Properties."

EMPLOYEES

Following the Distribution, the Company will have approximately 17
employees, approximately 15 of whom will be shared with Excel. The shared
employees will be compensated by the Company and Excel on a pro rata basis for
time spent on their respective affairs. The Company will pay its pro rata share
of such employees' salaries to Excel and Excel will pay the employees their
regular salaries. The Company believes that its future prospects will depend, in
part, on its ability to continue to attract and retain skilled management
personnel.

CORPORATE HEADQUARTERS

Excel has agreed to make available to the Company, at Excel's principal
office located at 16955 Via Del Campo, Suite 100, San Diego, California 92127,
space for the Company's principal corporate office. The Company will lease the
space from Excel at current market rates. The Company believes that these
facilities are adequate to meet its current needs and that suitable additional
or alternative space will be available on commercially reasonable terms as
needed.

LEGAL PROCEEDINGS

The Company is a newly-formed corporation and, as such, is not a party to
any legal proceedings.

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MANAGEMENT

BOARD OF DIRECTORS

Upon consummation of the Distribution, the Company's Board of Directors is
expected to be comprised of six directors: Gary B. Sabin, Richard B. Muir, John
H. Wilmot, Robert E. Parsons, Jr., Michael D. Coster and . Such
directors will serve until the next Annual Meeting of Stockholders of the
Company and until their respective successors have been duly elected and
qualified.

The table below indicates the name, position with the Company and age of
each nominee for director.

<TABLE>
<CAPTION>
NAME POSITION WITH LEGACY AGE
- -------------------------------- ------------------------------------------------------ ---
<S> <C> <C>
Gary B. Sabin................... Chairman, President and Chief Executive Officer 44

Richard B. Muir................. Director, Executive Vice President and Secretary 43

John H. Wilmot.................. Director 54

Robert E. Parsons, Jr........... Director 41

................ Director

................ Director
</TABLE>

GARY B. SABIN has served as Chairman of the Board of Directors, President
and Chief Executive Officer of Excel since January 1989 and of EDV and Excel
Interfinancial Corporation ("EIC") since their formation. Mr. Sabin has served
as Chief Executive Officer of various companies since his founding of Excel's
predecessor company and its affiliates starting in 1977. He has been active for
20 years in diverse aspects of the real estate industry, including the
evaluation and negotiation of real estate acquisitions, management, financing
and dispositions.

RICHARD B. MUIR has served as Director, Executive Vice President and
Secretary of Excel since January 1989 and as Executive Vice President of EDV
since its formation. Mr. Muir has served as an officer and director for various
affiliates of Excel since 1978, primarily in administrative and executive
capacities, including direct involvement in and supervision of asset
acquisitions, management, financing and dispositions.

JOHN H. WILMOT has served as a Director of Excel since 1989. Mr. Wilmot,
individually and through his wholly-owned corporations, develops and manages
real property, primarily in the Phoenix/Scottsdale area, and has been active in
such business since prior to 1989.

ROBERT E. PARSONS, JR. has served as a Director of Excel since January 1989.
Mr. Parsons is presently Executive Vice President and Chief Financial Officer of
Host Marriott Corporation, a company he joined in 1981. He also serves as a
Director and officer of several Host Marriott subsidiaries, and as a Director of
Merrill Financial Corporation, a privately-held real estate company.

[BIOS OF ADDITIONAL DIRECTORS TO COME]

COMMITTEES OF THE BOARD OF DIRECTORS

AUDIT COMMITTEE. The Audit Committee will consist of Messrs. . The
Audit Committee will review the annual audits of the Company's independent
public accountants, review and evaluate internal accounting controls, recommend
the selection of the Company's independent public accountants, review and pass
upon (or ratify) related party transactions, and conduct such reviews and
examinations as it deems necessary with respect to the practices and policies
of, and the relationship between, the Company and its independent public
accountants.

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COMPENSATION COMMITTEE. The Compensation Committee will consist of Messrs.
. The Compensation Committee will review salaries, bonuses and stock
options of senior officers of the Company, and administer the Company's
executive compensation policies and stock option plans.

EXECUTIVE COMMITTEE. The Executive Committee will consist of Messrs.
. The Executive Committee will have all powers and rights necessary to
exercise the full authority of the Company Board in the management of the
business and affairs of the Company, except as provided in the Delaware General
Corporation Law or the Company Bylaws.

COMPENSATION OF THE BOARD OF DIRECTORS

Each non-employee director of the Company will receive $6,000 per year for
serving on the Company Board and an additional $500 for each meeting attended
(other than committee meetings). An additional $4,000 will be paid to any
non-employee director who serves on the Executive Committee. Each director is
eligible to receive stock options pursuant to the Legacy Stock Option Plan.

Directors also will receive reimbursement for travel expenses incurred in
connection with their duties as directors.

EXECUTIVE OFFICERS

Set forth below are the names, positions and ages of the individuals who
will become executive officers of the Company upon consummation of the
Distribution:

<TABLE>
<CAPTION>
NAME POSITION WITH LEGACY AGE
- ------------------------------- ------------------------------------------------------ ---
<S> <C> <C>
Gary B. Sabin.................. Chairman, President and Chief Executive Officer 44

Richard B. Muir................ Director, Executive Vice President and Secretary 43

Graham R. Bullick, Ph.D........ Senior Vice President--Capital Markets 47

Ronald H. Sabin................ Senior Vice President--Asset Management 47

David A. Lund.................. Chief Financial Officer 46

S. Eric Ottesen................ Senior Vice President, General Counsel and Assistant
Secretary 43

Mark T. Burton................. Senior Vice President--Acquisitions 37
</TABLE>

GARY B. SABIN has served as Chairman of the Board of Directors, President
and Chief Executive Officer of Excel since January 1989 and of EDV and EIC since
their formation. Mr. Sabin has served as Chief Executive Officer of various
companies since his founding of Excel's predecessor company and its affiliates
starting in 1977. He has been active for 20 years in diverse aspects of the real
estate industry, including the evaluation and negotiation of real estate
acquisitions, management, financing and dispositions.

GRAHAM R. BULLICK, PH.D. has served as Senior Vice President--Capital
Markets of Excel since January 1991. Previously, Dr. Bullick was associated with
Excel as a Director from 1991 to 1992. From 1985 to 1991, Dr. Bullick served as
Vice President and Chief Operations Officer for a real estate investment firm,
where his responsibilities included acquisition and financing of investment real
estate projects.

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<PAGE>
RONALD H. SABIN has served as Senior Vice President--Asset Management of
Excel since January 1989. Mr. Sabin has served as an officer or otherwise been
employed by affiliates of Excel since 1979, primarily providing property
management services. Mr. Sabin has supervised the management of Excel's
properties for 15 years and is a licensed real estate broker and a licensed
property and casualty insurance agent. Ronald Sabin is the brother of Gary
Sabin.

DAVID A. LUND has served as Chief Financial Officer of Excel since 1994 and
as a Vice President of Excel since 1988. Mr. Lund has served as an officer and
director of certain affiliates of Excel since 1983. Prior to 1983, Mr. Lund was
a partner in a public accounting firm. Mr. Lund is a Certified Public
Accountant.

S. ERIC OTTESEN has served as General Counsel of Excel since January 1995,
as Senior Vice President since October 1995 and as Assistant Secretary since
September 1996. From 1987 to 1995, Mr. Ottesen was a senior partner in a San
Diego law firm.

MARK T. BURTON has served as Senior Vice President--Acquisitions of Excel
since October 1995 and as a Vice President of Excel since January 1989. Mr.
Burton has been associated with Excel and its affiliates since 1983, primarily
in the evaluation and selection of property acquisitions.

EXECUTIVE OFFICER COMPENSATION

The Company was recently formed. None of the Company's executive officers
has received compensation from or on behalf of the Company since its formation.
The Company has no employment agreements with any person and does not presently
anticipate paying a salary or other compensation to any executive officer for
his services in such capacity, although options will be granted to the executive
officers. See
"--Legacy Stock Option Plan." The Company may in the future consider paying a
salary or other compensation to employees who are shared with Excel on the basis
of an allocation of their salary from Excel.

The following table provides certain information concerning the stock
options which the Company expects to grant to its executive officers as of the
Distribution Date. The Company does not expect to grant any stock appreciation
rights as of such date.

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<PAGE>
OPTION GRANTS

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS EXERCISE OR FOR OPTION TERM(1)
OPTIONS GRANTED TO BASE PRICE EXPIRATION ---------------------
NAME GRANTED EMPLOYEES PER SHARE DATE 5.0% 10.0%
- ------------------------------------- ----------- ------------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gary B. Sabin........................ 800,000 22.9% (2) (3) -- $ 480,913
Richard B. Muir...................... 800,000 22.9 (2) (3) -- 480,913
Graham R. Bullick.................... 300,000 8.6 (2) (3) -- 180,342
Ronald H. Sabin...................... 300,000 8.6 (2) (3) -- 180,342
David A. Lund........................ 300,000 8.6 (2) (3) -- 180,342
S. Eric Ottesen...................... 300,000 8.6 (2) (3) -- 180,342
Mark T. Burton....................... 300,000 8.6 (2) (3) -- 180,342
</TABLE>

- ------------------------

(1) These amounts represent assumed rates of appreciation in the price of the
Company Common Stock during the terms of the options in accordance with
rates specified in applicable federal securities regulations (assuming the
per share market value as of the date of grant equals the estimated book
value per share of $2.39). Actual gains, if any, on stock option exercises
will depend on the future price of the Company Common Stock and overall
stock market conditions. There is no representation that the rates of
appreciation reflected in this table will be achieved.

(2) One-half of the options will have an exercise price of $5.00 per share, and
the other half will have an exercise price of $10.00 per share.

(3) The options will vest in five equal installments commencing on the first
anniversary of the date of grant, and will expire on the tenth anniversary
of the date of grant.

LEGACY STOCK OPTION PLAN

Prior to the Distribution Date, the Company will adopt (which adoption will
be approved by Excel, as sole stockholder of the Company) the 1998 Stock Option
Plan of Excel Legacy Corporation (the "Legacy Stock Option Plan"). The principal
purposes of the Legacy Stock Option Plan will be to provide incentives for
officers, employees and consultants of the Company and its subsidiaries through
the granting of options ("Options"), thereby stimulating their personal and
active interest in the Company's development and financial success, and inducing
them to remain in the Company's employ. In addition to Options granted to
officers, employees and consultants, the Legacy Stock Option Plan will provide
for formula grants of Options ("Director Options") to the Company's directors.

Under the Legacy Stock Option Plan, not more than 5,250,380 shares of
Company Common Stock (or the equivalent in other equity securities) will be
authorized for issuance upon exercise of Options. Furthermore, the maximum
number of shares which may be subject to Options granted under the Legacy Stock
Option Plan to any individual in any calendar year may not exceed 525,000.

Upon consummation of the Distribution, the Company will issue Options to
acquire an aggregate of 3,100,000 shares of Company Common Stock to its
executive officers under the Legacy Stock Option Plan, 50.0% of which will have
an exercise price of $5.00 per share and 50.0% of which will have an exercise
price of $10.00 per share. The Options will become exercisable in five equal
annual installments commencing on the first anniversary of the date of grant.

The principal features of the Legacy Stock Option Plan are summarized below,
but the summary is qualified in its entirety by reference to the Legacy Stock
Option Plan, which is attached hereto as Annex III.

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<PAGE>
ADMINISTRATION. Following the Distribution, the Compensation Committee of
the Company Board or another committee thereof (the "Committee") will administer
the Legacy Stock Option Plan with respect to grants to employees or consultants
of the Company and the full Company Board will administer the Legacy Stock
Option Plan with respect to Director Options. The Committee will consist of at
least two members of the Company Board, each of whom is a "non-employee
director" for purposes of Rule 16b-3 under the Exchange Act ("Rule 16b-3") and,
with respect to Options which are intended to constitute performance-based
compensation under Section 162(m) of the Code, an "outside director" for
purposes of Section 162(m) of the Code. Subject to the terms and conditions of
the Legacy Stock Option Plan, the Company Board or the Committee has the
authority to select the persons to whom Options are to be made, to determine the
number of shares to be subject thereto and the terms and conditions thereof, and
to make all other determinations and to take all other actions necessary or
advisable for the administration of the Legacy Stock Option Plan. Similarly, the
Company Board has discretion to determine the terms and conditions of Director
Options and to interpret and administer the Legacy Stock Option Plan with
respect to Director Options. The Committee (and the Company Board) are also
authorized to adopt, amend and rescind rules relating to the administration of
the Legacy Stock Option Plan.

ELIGIBILITY. Options under the Legacy Stock Option Plan may be granted to
individuals who are then officers or other employees of the Company or any of
its present or future subsidiaries. Such Options also may be granted to
consultants of the Company selected by the Company Board or the Committee for
participation in the Legacy Stock Option Plan. Non-employee directors of the
Company will be granted NQSOs (as defined below) pursuant to the formula grant
provisions of the Legacy Stock Option Plan.

OPTIONS UNDER THE LEGACY STOCK OPTION PLAN. The Legacy Stock Option Plan
provides that the Committee may grant or issue Options. Each grant will be set
forth in a separate agreement with the person receiving the award and will
indicate the type, terms and conditions of the grant.

Nonqualified Stock Options ("NQSOs") will provide for the right to purchase
Company Common Stock at a specified price which, except with respect to NQSOs
intended to qualify as performance-based compensation under Section 162(m) of
the Code, may be less than fair market value on the date of grant (but not less
than par value), and usually will become exercisable (in the discretion of the
Company Board or the Committee) in one or more installments after the grant
date, subject to the participant's continued employment with the Company and/or
subject to the satisfaction of individual or Company performance targets
established by the Company Board or the Committee. NQSOs may be granted for any
term specified by the Company Board or the Committee.

Incentive Stock Options ("ISOs"), will be designed to comply with the
provisions of the Code and will be subject to certain restrictions contained in
the Code. Among such restrictions, ISOs must have an exercise price not less
than the fair market value of a share of Company Common Stock on the date of
grant, may only be granted to employees, must expire within a specified period
of time following the optionee's termination of employment, and must be
exercised within ten years after the date of grant. ISOs may be subsequently
modified to disqualify them from treatment as ISOs. In the case of an ISO
granted to an individual who owns (or is deemed to own) at least 10.0% of the
total combined voting power of all classes of stock of the Company, the Legacy
Stock Option Plan provides that the exercise price must be at least 110.0% of
the fair market value of a share of Company Common Stock on the date of grant
and the ISO must expire upon the fifth anniversary of the date of grant.

SECURITIES LAWS AND FEDERAL INCOME TAXES. The Legacy Stock Option Plan is
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Commission thereunder, including without limitation Rule
16b-3. The Legacy Stock Option Plan will be administered, and Options will be
granted and may be exercised, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, the Legacy
Stock Option Plan and Options granted thereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

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<PAGE>
Under current Federal laws, in general, recipients of grants of NQSOs under
the Legacy Stock Option Plan are taxable under Section 83 of the Code upon their
receipt of Company Common Stock or cash with respect to such grants and, subject
to Section 162(m) of the Code, the Company will be entitled to an income tax
deduction with respect to the amounts taxable to such recipients. Under Sections
421 and 422 of the Code, recipients of ISOs are generally not taxable on their
receipt of Company Common Stock upon their exercise of ISOs if the ISOs and
option stock are held for certain minimum holding periods and, in such event,
the Company is not entitled to income tax deductions with respect to such
exercises. Participants in the Legacy Stock Option Plan will be provided with
detailed information regarding the tax consequences relating to the various
types of grants under the plan.

In general, under Section 162(m) of the Code, income tax deductions of
publicly-held corporations may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and non-qualified
benefits paid) for certain executive officers exceeds $1.0 million (less the
amount of any "excess parachute payments" as defined in Section 280G of the
Code) in any one year. However, under Section 162(m), the deduction limit does
not apply to certain "performance-based compensation" established by an
independent compensation committee which is adequately disclosed to, and
approved by, stockholders. In particular, stock options will satisfy the
"performance-based compensation" exception if the options are granted by a
qualifying compensation committee, the plan sets the maximum number of shares
that can be granted to any person within a specified period and the compensation
is based solely on an increase in the stock price after the grant date (I.E.,
the option exercise price is equal to or greater than the fair market value of
the stock subject to the award on the grant date).

The Company has attempted to structure the Legacy Stock Option Plan in such
a manner that, after the Distribution Date, subject to obtaining stockholder
approval for the stock options, the remuneration attributable to stock options
which meet the other requirements of Section 162(m) will not be subject to the
$1.0 million limitation. The Company has not, however, requested a ruling from
the IRS or an opinion of counsel regarding this issue.

INDEMNIFICATION AGREEMENTS

The Company will enter into indemnification agreements with its directors
and certain executive officers (each, an "Indemnified Person"). An Indemnified
Person is specifically indemnified and held harmless under such agreements for
costs and expenses, including without limitation, damages, judgments, amounts
paid in settlement, reasonable costs of investigation, reasonable attorneys'
fees, costs of investigative, judicial or administrative proceedings or appeals,
costs or attachment of similar bonds, fines, penalties, and excise taxes
assessed with respect to employee benefit plans actually and reasonably incurred
in connection with a threatened, pending or completed claim, action, suit or
proceeding by reason of the fact that (i) he is or was a director, officer,
employee and/or agent of the Company, or (ii) he is or was serving as a
director, officer, employee, trustee and/or agent of another corporation or
entity at the request of the Company. To qualify for indemnification, the claim
must not be (i) based solely upon an Indemnified Person's gaining in fact any
personal profit or advantage to which he was not legally entitled, (ii) an
accounting for profits made from the purchase or sale of securities pursuant to
Section 16(b) of the Exchange Act, or (iii) based solely upon knowingly
fraudulent, deliberately dishonest, or willful misconduct on the part of the
Indemnified Person. The Company will indemnify the Indemnified Person to the
extent that (i) the Indemnified Person gives the Company prompt written notice
of any claim, (ii) expenses have not been advanced pursuant to Article Eighth of
the Company Certificate, (iii) the Indemnified Person has not already received
payment pursuant to collectible insurance policies, and (iv) indemnification is
not unlawful.

Under such indemnification agreements, the Company will advance costs and
expenses incurred by the Indemnified Person in advance of the final disposition
of an action, suit or proceeding if he undertakes to repay amounts advanced if
it is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the Company. The Company will advance costs and
expenses related to

63
<PAGE>

defending or investigating an action, suit or proceeding unless a determination
is made that (i) the Indemnified Person did not act in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, (ii) the Indemnified Person intentionally breached his duty to the
Company or its stockholders, or (iii) with respect to any criminal action or
proceeding, the Indemnified Person had reasonable cause to believe his conduct
was unlawful. Such determination will be made by a majority vote of a quorum of
the Company Board consisting of directors not a party to the suit, action or
proceeding, by a written opinion of independent legal counsel, by the
stockholders or by a final, nonappealable adjudication in a court of competent
jurisdiction. If the Company advances costs and expenses of any action, suit or
proceeding, the Company reserves the right to assume the defense of such action,
suit or proceeding upon written notice to the Indemnified Person of its
intention to do so. After delivery of such notice, the Company shall not be
liable for any costs or expenses incurred by the Indemnified Person in retaining
separate counsel unless (i) the employment of separate counsel was previously
authorized by the Company, (ii) the Indemnified Person reasonably concludes that
joint representation would entail a conflict of interest, or (iii) the Company
shall not, in fact, have employed counsel to assume the defense of such action,
suit or proceeding. The indemnification provisions and provisions for advancing
expenses in such agreements are expressly not exclusive of any other rights of
indemnification or advancement of expenses pursuant to the Delaware General
Corporation Law (the "DGCL"), the Company Certificate and the Company Bylaws.

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<PAGE>
CERTAIN TRANSACTIONS

INTERESTS RELATING TO EXCEL

Excel is the sole stockholder of the Company as of the date of this
Information Statement. Prior to the Distribution, Excel and EDV will transfer to
the Company certain real properties, notes receivable and related assets and
liabilities currently held by Excel and EDV. As consideration for such asset
transfers, the Company will issue to Excel (i) a sufficient number of shares of
Company Common Stock to effect the Distribution, and (ii) a promissory note
payable to Excel in the amount of approximately $24.9 million. Such note will
bear interest at the rate of 12.0% per annum, mature in and be a
non-recourse obligation secured by a first mortgage on the Scottsdale Galleria.
In addition, in connection with such asset transfers, Excel will cancel certain
indebtedness of EDV currently held by Excel in the amount of approximately $32.5
million. See "RELATIONSHIP BETWEEN LEGACY AND EXCEL AFTER THE DISTRIBUTION."

The Intercompany Agreement between the Company and Excel will set forth the
basis on which the Company and Excel will provide each other with rights to
participate in certain transactions. See "THE COMPANY--Intercompany Agreement."

PRIVATE PLACEMENTS

The Company has obtained commitments to buy, effective upon consummation of
the Distribution, (i) 9,195,224 shares of Company Common Stock in a private
placement to certain of the Company's officers at a price per share of $2.39
(the estimated market value of the Company Common Stock as of the Distribution
Date based upon the value of the assets being transferred to the Company), for
an aggregate purchase price of approximately $22.0 million, and (ii)
shares of Series A Cumulative Convertible Preferred Stock of the Company
("Series A Preferred Stock") in a private placement to certain "qualified
institutional buyers" (as such term is defined in Rule 144A under the Securities
Act) at a price per share of $5.00, for an aggregate purchase price of
approximately $200.0 million. For a list of the purchasers in the foregoing
private placements and the respective amounts of Company Common Stock and Series
A Preferred Stock purchased, see "SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT." For a description of the rights, preferences and
privileges of the Series A Preferred Stock, see "DESCRIPTION OF THE COMPANY'S
CAPITAL STOCK--Series A Preferred Stock."

The Company has agreed to loan to certain of its officers, in connection
with their purchase of Company Common Stock described above, 50.0% of the
purchase price therefor (an aggregate amount of approximately $11.0 million).
Such loans will bear interest at the rate of 7.0% per annum, mature in
2003 and be recourse obligations of such officers.

The Company has retained BancBoston Securities Inc. ("BSI"), an affiliate of
BankBoston, N.A., to act as placement agent in connection with the private
placement of Series A Preferred Stock described above. Pursuant to such
engagement, the Company will pay to BSI a success fee of approximately 2.5% of
funds raised upon completion of the private placement. As noted in "SECURITIES
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT," BSI has agreed to
acquire shares of Series A Preferred Stock in the private placement.

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<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number of shares of Company Common Stock
and Series A Preferred Stock (collectively, the "Voting Stock") expected to be
beneficially owned immediately following the Distribution by (i) the executive
officers and directors of the Company, (ii) all of the Company's executive
officers and directors as a group, and (iii) all other stockholders expected to
beneficially own more than 5.0% of the Company Common Stock or Series A
Preferred Stock, based upon the beneficial ownership by such persons of Excel
Common Stock as of December 31, 1997, and the private placements described in
"CERTAIN TRANSACTIONS." Except as otherwise indicated, each individual named has
a business address of 16955 Via Del Campo, Suite 100, San Diego, California
92127, and is expected to have sole investment and voting power with respect to
the securities shown.

<TABLE>
<CAPTION>
NUMBER
OF
SHARES
NUMBER OF OF
SHARES OF SERIES
COMPANY A
COMMON PREFERRED
STOCK STOCK
BENEFICIALLY BENEFICIALLY PERCENT
NAME OWNED(1) OWNED(2) BENEFICIALLY OWNED
- ----------------------------------- ----------- ------- -------------------------------------------------------
<S> <C> <C> <C>
Gary B. Sabin(3)................... 3,840,805 -- 12.68% of Company Common Stock
% of Voting Stock

Richard B. Muir.................... 1,077,190 -- 3.56% of Company Common Stock
% of Voting Stock

Ronald H. Sabin.................... 1,085,418 -- 3.58% of Company Common Stock
% of Voting Stock

David A. Lund...................... 1,021,750 -- 3.37% of Company Common Stock
% of Voting Stock

Mark T. Burton..................... 1,018,300 -- 3.36% of Company Common Stock
% of Voting Stock

Graham R. Bullick.................. 1,006,605 -- 3.32% of Company Common Stock
% of Voting Stock

S. Eric Ottesen.................... 999,469 -- 3.30% of Company Common Stock
% of Voting Stock

John H. Wilmot(4).................. 91,929 -- 0.30% of Company Common Stock
% of Voting Stock

Robert E. Parsons, Jr.(5).......... 4,796 -- 0.02% of Company Common Stock
% of Voting Stock

[Additional Directors]............. -- % of Company Common Stock
% of Voting Stock

Officers and Directors as a group 10,146,262 -- 33.49% of Company Common Stock
(11 persons)..................... % of Voting Stock

Fidelity Management Company(6)..... -- % of Company Common Stock
% of Voting Stock
</TABLE>

- ------------------------

(1) Includes shares of Company Common Stock to be purchased from the Company in
a private placement, effective upon consummation of the Distribution, as
follows: Mr. Gary Sabin, 2,998,410; Mr. Muir, 999,469; Mr. Ronald Sabin,
999,469; Mr. Lund, 999,469; Mr. Burton, 999,469; Mr. Bullick, 999,469; and
Mr. Ottesen, 999,469. See "CERTAIN TRANSACTIONS."

(2) Includes shares of Series A Preferred Stock to be purchased from the
Company in a private placement, effective upon consummation of the
Distribution, as follows: . See "CERTAIN TRANSACTIONS."

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<PAGE>
(3) Includes shares of Company Common Stock to be held by EIC, of which Gary
Sabin is the controlling stockholder.

(4) Mr. Wilmot's business address is 4455 E. Camelback Rd., Phoenix, Arizona
85018.

(5) Mr. Parson's business address is Host Marriott Corporation, 10400 Fernwood
Road, Washington, D.C. 20058.

(6) Fidelity is a group of funds of which no single fund is expected to own
more than 5.0% of the Company Common Stock. Fidelity's business address is
82 Devonshire Street, Boston, Massachusetts 02109.

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<PAGE>
LEGACY CERTIFICATE OF INCORPORATION AND BYLAWS

Prior to the Distribution Date, the Company's Certificate of Incorporation
and Bylaws will be amended by the Company Board and by Excel, as sole
stockholder of the Company. The following is a summary of such Amended and
Restated Certificate of Incorporation (the "Company Certificate") and such
Amended and Restated Bylaws (the "Company Bylaws") and is qualified in its
entirety by reference to the complete text of the Company Certificate as set
forth in Annex I hereto, and the Company Bylaws as set forth in Annex II hereto.

AUTHORIZED STOCK

The Company Certificate will provide that the Company is authorized to issue
200,000,000 shares of stock, consisting of 150,000,000 shares of Company Common
Stock and 50,000,000 shares of preferred stock, par value $.01 per share
("Company Preferred Stock" and, together with the Company Common Stock, "Company
Stock"). Shares of Company Preferred Stock may be issued from time to time, in
one or more series, each of which series shall have such voting powers,
designations, preferences and rights, and the qualifications, limitations or
restrictions relating thereto, as shall be authorized by the Company Board. See
"DESCRIPTION OF THE COMPANY'S CAPITAL STOCK."

DIRECTORS

The Company Bylaws will provide that the number of directors shall consist
of three or more members, the exact number of which shall be fixed by the
Company Board from time to time. Initially, the Company Board will have five
members. The Company Bylaws will provide that, except as otherwise provided by
law or the Company Certificate, a quorum of the Company Board for the
transaction of business shall consist of a majority of the entire Board of
Directors. The act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. The Company
Certificate and the Company Bylaws will not provide for a classified board or
for cumulative voting in the election of directors to the Company Board. The
Company Bylaws will provide that vacancies and any newly-created directorships
resulting from an increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director.

LIABILITY FOR MONETARY DAMAGES

The Company Certificate will provide that no director will be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, other than liability for breach of the duty of
loyalty to the Company or its stockholders, acts or omissions not in good faith,
intentional misconduct, a knowing violation of law, certain unlawful dividends,
stock repurchases or redemptions or any transaction from which the director
derived an improper personal benefit. Any repeal or modification of such
provision by the stockholders of the Company will not adversely affect any right
or protection of a director existing at the time of such repeal or modification
with respect to acts or omissions occurring prior to such repeal or
modification.

ANTI-TAKEOVER EFFECT OF AUTHORIZED BUT UNDESIGNATED PREFERRED STOCK

As described above, the Company Board will be authorized to provide for the
issuance of shares of Company Preferred Stock, in one or more series, and to fix
by resolution of the Company Board and to the extent permitted by the DGCL, the
terms and conditions of each such series. The Company believes that the
availability of Company Preferred Stock will provide the Company with increased
flexibility in structuring possible future financings and acquisitions and in
meeting other corporate needs which might arise from time to time. Authorized
but unissued shares of Company Preferred Stock, as well as authorized but
unissued shares of Company Common Stock, will be available for issuance without
further action by Company stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which any class of Company Stock may then be listed for trading.

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<PAGE>
Although the Company Board has no present intention of doing so (other than
as described in the section entitled "CERTAIN TRANSACTIONS"), it will be able to
issue a series of Company Preferred Stock that could, depending on its terms,
either impede or facilitate the completion of a merger, tender offer or other
takeover attempt. For instance, such new shares might impede a business
combination by including class voting rights which would enable the holder to
block such transaction or facilitate a business combination by including voting
rights which would provide a required percentage vote of stockholders. The
Company Board will make any determination to issue such shares based on its
judgment as to the best interests of the Company and its then existing
stockholders. The Company Board, in so acting, will be able to issue Company
Preferred Stock having terms which would discourage an acquisition attempt or
other transaction that some or a majority of the stockholders might believe to
be in their best interests or in which stockholders might receive a premium for
their stock over the then market price of such stock.

INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

The Company Certificate will provide for the indemnification of present and
former directors and officers of the Company and persons serving as directors,
officers, employees or agents of another corporation or entity at the request of
the Company (each, an "Indemnified Party") to the fullest extent permitted by
the DGCL. Indemnified Parties are specifically indemnified in the Company
Certificate and the Company Bylaws (the "Indemnification Provisions") for
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by an Indemnified Party (i) in
connection with a threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the fact
that he is or was a director or officer of the Company or is or was serving as a
director, officer, employee or agent of another corporation or entity at the
request of the Company, or (ii) in connection with the defense or settlement of
a threatened, pending or completed action or suit by or in the right of the
Company, provided that such indemnification is permitted only with judicial
approval if the Indemnified Party is adjudged to be liable to the Company. Such
Indemnified Party must have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the subject
corporation and, with respect to any criminal action or proceeding, must have
had no reasonable cause to believe his conduct was unlawful. Any indemnification
under the Indemnification Provisions must be authorized based on a determination
that the indemnification is proper if the applicable standard of conduct has
been met by the Indemnified Party, provided that no such authorization is
required, and indemnification is mandatory, where a director or officer of the
Company is successful in the defense of such action, suit or proceeding or any
claim or matter therein. Otherwise, such determination will be made by a
majority vote of a quorum of the Company Board consisting of directors not a
party to the suit, action or proceeding, by a written opinion of independent
legal counsel or by the stockholders. In the event that a determination is made
that a director or officer is not entitled to indemnification under the
Indemnification Provisions, the Indemnification Provisions provide that the
Indemnified Party may seek a judicial determination of his right to
indemnification. The Indemnification Provisions further provide that the
Indemnified Party is entitled to indemnification for all expenses (including
attorneys' fees) incurred in any proceeding seeking to collect from the Company
an indemnity claim under the Indemnification Provisions if such Indemnified
Party is successful. Other than proceedings to enforce rights to
indemnification, the Company is not obligated to indemnify any person in
connection with a proceeding initiated by such person, unless authorized by the
Company Board.

The Company will pay expenses incurred by a director or officer of the
Company, or a former director or officer of the Company, in advance of the final
disposition of an action, suit or proceeding, if he undertakes to repay amounts
advanced if it is ultimately determined that he is not entitled to be
indemnified by the Company.

The Indemnification Provisions and provisions for advancing expenses in the
Company Certificate will be expressly not exclusive of any other rights of
indemnification or advancement of expenses pursuant to the Company Bylaws. The
Indemnification Provisions and provisions for advancing expenses in the Company
Bylaws and the Company Certificate will be expressly not exclusive of any other
rights of

69
<PAGE>
indemnification or advancement of expenses pursuant to any agreement, vote of
the stockholders or disinterested directors or pursuant to judicial direction.
The Company will be authorized to purchase insurance on behalf of an Indemnified
Party for liabilities incurred, whether or not the Company would have the power
or obligation to indemnify him pursuant to the Company Certificate, the Company
Bylaws or the DGCL.

In addition, the Company will enter into indemnification agreements with its
directors and certain of its executive officers pursuant to which such persons
are indemnified for costs and expenses actually and reasonably incurred by such
persons in connection with a threatened, pending or completed claim arising out
of service as a director, officer, employee, trustee and/or agent of the Company
or another entity at the request of the Company. See
"MANAGEMENT--Indemnification Agreements."

AMENDMENT OF THE COMPANY CERTIFICATE AND BYLAWS

The DGCL provides that approval of a majority of the stockholders entitled
to vote thereon is required to amend the Company Certificate. A bylaw may be
amended or repealed, or a new bylaw adopted, by (i) the affirmative vote of the
holders of a majority of the stock entitled to vote thereon, or (ii) a majority
of the entire Company Board.

TRANSACTIONS WITH INTERESTED OFFICERS OR DIRECTORS

The Company Bylaws will provide, in accordance with the DGCL, that contracts
or transactions between the Company and a director or officer of the Company or
a corporation or entity in which such officer or director is also an officer or
director or has a financial interest, are not void or voidable solely for such
reason or solely because the Company officer or director is present at or
participates in any meeting of the Company Board which authorizes the
transaction or contract, or solely because such officer's or director's vote is
counted for such purpose, if (i) the material facts as to his relationship or
interest are disclosed or are known to the Company Board or a committee and the
Company Board or a committee in good faith authorizes such contract or
transaction; (ii) the material facts as to his relationship or interest are
disclosed or are known to the stockholders entitled to vote thereon and the
stockholders in good faith specifically approve such contract or transact; or
(iii) the contract or transaction is fair to the Company at the time it is
authorized, approved or ratified by the Company Board, a committee or the
stockholders. In addition, the Company Bylaws will provide that any transactions
with interested directors or officers or their affiliates shall be made on
commercially reasonable terms substantially equivalent to terms available from
third parties in an arm's-length transaction in the competitive marketplace.

70
<PAGE>
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK

GENERAL

The Company's authorized capital stock consists of 1,000 shares of Company
Common Stock, of which 100 shares are issued and outstanding and are owned by
Excel. Under the Company Certificate, which will be adopted by the Company Board
and by Excel, as sole stockholder of the Company, prior to the Distribution Date
in substantially the form set forth in Annex I to this Information Statement,
the total number of shares of all classes of stock that the Company will have
authority to issue will be 200,000,000, of which 150,000,000 will be shares of
Company Common Stock and 50,000,000 will be shares of Company Preferred Stock.

Based on the number of shares of Excel Common Stock outstanding on the
Record Date, approximately shares of Company Common Stock, constituting
approximately % of the authorized Company Common Stock, will be issued to
Excel and distributed to stockholders of Excel in the Distribution. In addition,
effective upon consummation of the Distribution, 9,195,224 shares of Company
Common Stock will be sold in a private placement to certain of the Company's
officers. See "CERTAIN TRANSACTIONS." All of the shares of Company Common Stock
issued in the Distribution and the private placement will be validly issued,
fully paid and nonassessable.

The Company Certificate will provide that the Company Board is authorized to
provide for the issuance of shares of Company Preferred Stock, from time to
time, in one or more series. Prior to the issuance of shares in each series, the
Company Board is required by the Company Certificate and the DGCL to adopt
resolutions and file a Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions Thereof (the "Certificate of
Designation") with the Secretary of State of Delaware, fixing for each such
series the designations, preferences and relative, participating, optional or
other special rights applicable to the shares to be included in any such series
and any qualifications, limitations or restrictions thereon, including, but not
limited to, dividend rights, dividend rate or rates, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences as are permitted by
Delaware law.

The Company Certificate (including the Certificate of Designation to be
filed with respect to the Series A Preferred Stock) will classify shares
of Company Preferred Stock, constituting approximately % of the authorized
Company Preferred Stock as Series A Preferred Stock, to be sold in a private
placement to certain "qualified institutional buyers" upon consummation of the
Distribution. See "CERTAIN TRANSACTIONS." All of the shares of Series A
Preferred Stock issued in the private placement will be validly issued, fully
paid and nonassessable.

COMMON STOCK

VOTING RIGHTS. Each holder of Company Common Stock will be entitled to one
vote for each share registered in his name on the books of the Company on all
matters submitted to a vote of stockholders. Except as otherwise provided by
law, the holders of Company Common Stock will vote as one class. The shares of
Company Common Stock will not have cumulative voting rights. As a result,
subject to the voting rights, if any, of the holders of any shares of Company
Preferred Stock which may at the time be outstanding, the holders of Company
Common Stock entitled to exercise more than 50.0% of the voting rights in an
election of directors will be able to elect 100.0% of the directors to be
elected if they choose to do so. In such event, the holders of the remaining
shares of Company Common Stock voting for the election of directors will not be
able to elect any persons to the Company Board. The Company Certificate and the
Company Bylaws contain certain provisions that could have an anti-takeover
effect. See "LEGACY CERTIFICATE OF INCORPORATION AND BYLAWS."

71
<PAGE>
DIVIDEND RIGHTS. Subject to the rights of the holders of any shares of
Company Preferred Stock which may at the time be outstanding, holders of the
Company Common Stock will be entitled to such dividends as the Company Board may
declare out of funds legally available therefor. Because portions of the
operations of the Company may be conducted through wholly-owned subsidiaries,
the Company's cash flow and consequent ability to pay dividends on the Company
Common Stock may be dependent to some degree upon the earnings of such
subsidiaries and on dividends and other payments therefrom.

LIQUIDATION RIGHTS AND OTHER PROVISIONS. Subject to the prior rights of
creditors and the holders of any Company Preferred Stock which may be
outstanding from time to time, the holders of Company Common Stock are entitled
in the event of liquidation, dissolution or winding up to share pro rata in the
distribution of all remaining assets.

The Company Common Stock is not liable for any calls or assessments and is
not convertible into any other securities. In addition, there are no redemption
or sinking fund provisions applicable to the Company Common Stock.

The transfer agent and registrar for the Company Common Stock will be
BankBoston, N.A.

SERIES A PREFERRED STOCK

RANKING. With respect to the right to receive dividends and to participate
in distributions or payments in the event of any liquidation, dissolution or
winding up of the Company, the Series A Preferred Stock will rank (i) junior to
any other Company Preferred Stock ranking, as to dividends and upon liquidation,
prior to the Series A Preferred Stock, (ii) on a parity with any other Company
Preferred Stock ranking, as to dividends and upon liquidation, on a parity with
the Series A Preferred Stock, and (iii) senior to the Company Common Stock and
any other class or series of shares of stock of the Company ranking, as to
dividends and upon liquidation, junior to the Series A Preferred Stock
(collectively, the "Junior Shares").

DIVIDENDS. The holders of the Series A Preferred Stock are entitled to
receive, when, as and if declared by the Company Board, out of funds of the
Company legally available for payment thereof, cumulative cash dividends payable
in an amount per share equal to the cash dividends, if any, on the shares of
Company Common Stock (or portion thereof) into which a share of Series A
Preferred Stock is convertible. Such dividends will equal the number of shares
of Company Common Stock, or portion thereof, into which a share of Series A
Preferred Stock is convertible, multiplied by the most current quarterly
dividend on the Company Common Stock on or before the applicable dividend
payment date. Dividends on the Series A Preferred Stock will be payable
quarterly in arrears on the 15th day (or the next succeeding business day) of
January, April, July and October of each year. The amount of any dividend
payable on the Series A Preferred Stock for any period less than a full dividend
period will be computed pro rata on the basis of twelve 30-day months and a
360-day year.

In the event the Company fails to pay any dividend on the Series A Preferred
Stock, the Company may not pay any dividends on any other capital stock of the
Company other than (i) pro rata with other securities of the Company ranking
pari passu with the Series A Preferred Stock or (ii) with Junior Shares until
such dividend on the Series A Preferred Stock has been paid in full.

DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP. Upon the
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the holders of shares of the Series A Preferred Stock will be entitled to
receive and to be paid out of the assets of the Company available for
distribution to its stockholders, before any payment or distribution is made on
any Junior Shares, the amount of $5.00 per share of the Series A Preferred Stock
(the "Liquidation Preference"), plus (i) a premium equivalent to a 7.0% annual
total return on the Series A Preferred Stock from the date of issuance and (ii)
any accrued and unpaid dividends. If, upon any dissolution, liquidation or
winding up of the Company, the amounts payable to the holders of shares of the
Series A Preferred Stock and holders of any other shares of stock of

72
<PAGE>
the Company ranking as to any such distribution on a parity with the Series A
Preferred Stock are not paid in full, the holders of the Series A Preferred
Stock and of such other shares will share ratably in such distribution of assets
of the Company in proportion to the full respective preference amounts to which
they are entitled. A sale, conveyance or disposition of all or substantially all
of the assets of the Company shall be deemed to be a liquidation, dissolution or
winding up for purposes of payment of the Liquidation Preference.

REDEMPTION. The Series A Preferred Stock may not be redeemed by the Company
prior to , 2005. On , 2005 (the "Redemption Date"), the Company
will be required to redeem all outstanding shares of Series A Preferred Stock
for cash at a per share price equal to the Liquidation Preference, plus any
accrued and unpaid dividends to the Redemption Date. The Company will not be
entitled to redeem the Series A Preferred Stock prior to the Redemption Date.

VOTING RIGHTS. Except as otherwise required by law, the Series A Preferred
Stock, the Company Common Stock and any other capital stock of the Company
entitled to vote with the Company Common Stock will be deemed to be one class
for the purpose of voting, or giving written consent in lieu of voting, on all
matters submitted for the approval of the stockholders of the Company. Each
person in whose name shares of Series A Preferred Stock is registered on the
record date for determining the holders of the Series A Preferred Stock entitled
to vote at any meeting of stockholders (or adjournment thereof) or to consent to
corporate action in writing without a meeting will be entitled to, at such
meeting or with respect to such action, one vote for each share of Company
Common Stock into which each share of Series A Preferred Stock registered in the
name of such person on such record date could be converted (with any fractional
share determined on an aggregate conversion basis being rounded to the nearest
whole share).

So long as any shares of the Series A Preferred Stock remain outstanding,
the Company will not, without the affirmative vote of the holders of at least
two-thirds of the shares of the Series A Preferred Stock outstanding at the
time, (i) authorize or create, or increase the authorized amount of any shares
of any class or any security convertible into shares of any class ranking senior
to the Series A Preferred Stock with respect to the payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, or (ii)
amend, alter or repeal the provisions of the Company Certificate or of the
Company Bylaws so as to adversely affect any right, preference, privilege or
voting power of the Series A Preferred Stock or the holders thereof; provided,
however, that any increase in the amount of the authorized or issued shares of
any class or security convertible into any shares ranking on a parity with or
junior to the Series A Preferred Stock with respect to the payment of dividends
or the distribution of assets upon liquidation, dissolution or winding up, shall
not be deemed to adversely affect such rights, preferences, privileges or voting
powers.

CONVERSION RIGHTS. Holders of the Series A Preferred Stock have the right,
exercisable at any time and from time to time, to convert all or any of the
Series A Preferred Stock into Company Common Stock at a conversion price of
$5.00 per share of Company Common Stock (representing a premium of 109.2% in
excess of the estimated market value of the Company Common Stock as of the
Distribution Date) (the "Conversion Price").

In addition, in the event the closing price of the Company Common Stock on
the OTC Bulletin Board (or a successor quotation system or other principal
exchange) is equal to or greater than $5.00 per share for 30 consecutive trading
days following the Distribution Date, the Company shall have the right to
convert all of the outstanding shares of Series A Preferred Stock into a number
of shares of Company Common Stock equal to the product of (i) the number of
shares of Series A Preferred Stock to be converted multiplied by (ii) $5.00
divided by the Conversion Price then in effect.

CONVERSION PRICE ADJUSTMENTS. The Conversion Price is subject to adjustment
upon certain events, including (i) dividends (and other distributions) payable
in Company Common Stock or any class of capital stock of the Company (but
excluding issuances of Company Common Stock pursuant to the Company's

73
<PAGE>
employee benefit plans), (ii) the issuance to all holders of Company Common
Stock of certain rights or warrants entitling them to subscribe for or purchase
Company Common Stock at a price per share less than current market price per
share of the Company Common Stock (but excluding issuances of Company Common
Stock pursuant to the Company's employee benefit plans), (iii) subdivisions,
combinations and reclassifications of the Company Common Stock, and (iv)
distributions to all holders of Company Common Stock of evidences of
indebtedness of the Company or of assets (including securities and cash, but
excluding those dividends, rights, warrants and distributions referred to in
clause (i), (ii) or (iii) above).

REGISTRATION RIGHTS

The holders of the Series A Preferred Stock will be entitled to certain
rights with respect to the registration under the Securities Act of the Series A
Preferred Stock and the Company Common Stock into which such shares will be
convertible (collectively, the "Registrable Securities"). These rights will be
provided under the terms of an agreement to be entered into between the Company
and the holders of the Series A Preferred Stock as of the date of initial
issuance of the Series A Preferred Stock. Subject to certain limitations in the
agreement, the Company will agree to file, as promptly as practicable and in any
event within 60 days following the date of initial issuance of the Series A
Preferred Stock, a "shelf" registration statement under the Securities Act for
all of the Registrable Securities, and to use all reasonable efforts to cause
such registration statement to become effective within 60 days following the
date of filing. If the Company registers any of the Company Common Stock either
for its own account or for the account of other security holders, the holders of
Registrable Securities will be entitled to include their shares of Company
Common Stock in the registration. A holder's right to include shares in an
underwritten offering will be subject to certain conditions, including the right
of the underwriters to limit the number of shares included in the offering. All
expenses other than underwriting discounts and commissions incurred in
connection with such registrations will be borne by the Company.

74
<PAGE>
LIABILITY AND INDEMNIFICATION OF
OFFICERS AND DIRECTORS OF THE COMPANY

Articles Eighth and Ninth of the Company Certificate and Article VIII of the
Company Bylaws (the "Director Liability and Indemnification Provisions") limit
the personal liability of the Company's directors to the Company or its
stockholders for monetary damages for breach of fiduciary duty. The Director
Liability and Indemnification Provisions are substantially identical to
comparable provisions contained in Excel's Amended and Restated Articles and
Bylaws.

The Director Liability and Indemnification Provisions define and clarify the
rights of certain individuals, including the Company's directors and officers,
to indemnification by the Company in the event of personal liability or expenses
incurred by them as a result of certain litigation against them. Such provisions
are consistent with Section 102(b)(7) of the DGCL, which is designed, among
other things, to encourage qualified individuals to serve as directors of
Delaware corporations by permitting Delaware corporations to include in their
articles or certificates of incorporation a provision limiting or eliminating
directors' liability for monetary damages and with other existing DGCL
provisions permitting indemnification of certain individuals, including
directors and officers. The limitations of liability in the Director Liability
and Indemnification Provisions may not affect claims arising under the Federal
securities laws.

In performing their duties, directors of a Delaware corporation are
obligated as fiduciaries to exercise their business judgment and act in what
they reasonably determine in good faith, after appropriate consideration, to be
the best interests of the corporation and its stockholders. Decisions made on
that basis are protected by the "business judgment rule." The business judgment
rule is designed to protect directors from personal liability to the corporation
or its stockholders when business decisions are subsequently challenged.
However, the expense of defending lawsuits, the frequency with which unwarranted
litigation is brought against directors and the inevitable uncertainties with
respect to the outcome of applying the business judgment rule to particular
facts and circumstances mean that, as a practical matter, directors and officers
of a corporation rely on indemnity from, and insurance procured by, the
corporation they serve as a financial backstop in the event of such expenses or
unforeseen liability. The Delaware legislature has recognized that adequate
insurance and indemnity provisions are often a condition of an individual's
willingness to serve as director of a Delaware corporation. The DGCL has for
some time specifically permitted corporations to provide indemnity and procure
insurance for its directors and officers.

The Director Liability and Indemnification Provisions will be approved,
along with the rest of the Company Certificate and the Company Bylaws, by Excel,
as sole stockholder of the Company prior to the Distribution Date.

Set forth below is a description of the Director Liability and
Indemnification Provisions. Such description is intended as a summary only and
is qualified in its entirety by reference to the Company Certificate and the
Company Bylaws.

ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES. Article Ninth of the
Company Certificate protects directors against monetary damages for breaches of
their fiduciary duty of care, except as set forth below. Under the DGCL, absent
Article Ninth, directors could generally be held liable for gross negligence for
decisions made in the performance of their duty of care but not for simple
negligence. Article Ninth eliminates director liability for negligence in the
performance of their duties, including gross negligence. Directors remain liable
for breaches of their duty of loyalty to the Company and its stockholders, as
well as acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law and transactions from which a director
derives improper personal benefit. Article Ninth does not eliminate director
liability under Section 174 of the DGCL, which makes directors personally liable
for unlawful dividends or unlawful stock repurchases or redemptions and
expressly sets forth a negligence standard with respect to such liability.

75
<PAGE>
While Article Ninth provides directors with protection from awards of
monetary damages for breaches of the duty of care, it does not eliminate the
directors' duty of care. Accordingly, Article Ninth will have no effect on the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of the duty of care. The provisions of Article Ninth
which eliminate liability as described above will apply to officers of the
Company only if they are directors of the Company and are acting in their
capacity as directors, and will not apply to officers of the Company who are not
directors. The elimination of liability of directors for monetary damages in the
circumstances described above may deter persons from bringing third-party or
derivative actions against directors to the extent such actions seek monetary
damages.

INDEMNIFICATION AND INSURANCE. Under Section 145 of the DGCL, directors and
officers as well as other employees and individuals may be indemnified against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation--a "derivative action") if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe their conduct was unlawful. A similar
standard of care is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred in
connection with defense or settlement of such an action, and the DGCL requires
court approval before there can be any indemnification where the person seeking
indemnification has been found liable to the Company.

Article VIII of the Company Bylaws provides that all directors and officers
of the Company are entitled to indemnification as set forth in the Company
Certificate.

Article Eighth of the Company Certificate provides that each person who was
or is made a party to, or is involved in any action, suit or proceeding by
reason of the fact that he is or was a director, officer or employee of the
Company will be indemnified by the Company against all expenses and liabilities,
including counsel fees, paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Article
Eighth also provides that the right of indemnification shall be in addition to
and not exclusive of all other rights to which such director, officer or
employee may be entitled. See "LEGACY CERTIFICATE OF INCORPORATION AND BYLAWS--
Indemnification and Advancement of Expenses."

76
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
EXCEL LEGACY CORPORATION BALANCE SHEET:

Report of Coopers & Lybrand L.L.P., Independent Accountants.............................................. F-2

Balance Sheet as of November 17, 1997.................................................................... F-3

Note to Balance Sheet.................................................................................... F-4

EXCEL LEGACY CORPORATION ASSET GROUP FINANCIAL STATEMENTS:

Report of Coopers & Lybrand L.L.P., Independent Accountants.............................................. F-5

Combined Balance Sheets as of October 31, 1997 (unaudited), July 31, 1997 and July 31,
1996................................................................................................... F-6

Combined Statements of Operations for each of the three years in the period ended July 31, 1997 and the
three months ended October 31, 1997 (unaudited) and October 31, 1996 (unaudited)....................... F-7

Combined Statements of Changes in Investment by Excel Realty Trust, Inc. for each of the three years in
the period ended July 31, 1997 and the three months ended October 31, 1997 (unaudited) and October 31,
1996 (unaudited)....................................................................................... F-8

Combined Statements of Cash Flows for each of the three years in the period ended July 31, 1997 and the
three months ended October 31, 1997 (unaudited) and October 31, 1996 (unaudited)....................... F-9

Notes to Combined Financial Statements................................................................... F-10
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Excel Legacy Corporation

We have audited the accompanying balance sheet of Excel Legacy Corporation
(the "Company") as of November 17, 1997. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Excel Legacy Corporation as of
November 17, 1997, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

San Diego, California
November 24, 1997

F-2
<PAGE>
EXCEL LEGACY CORPORATION

BALANCE SHEET

NOVEMBER 17, 1997

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Cash................................................................................................... $ 1,000
---------
---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 1,000 shares authorized, 100 shares outstanding.......................... $ 1
Additional paid-in capital............................................................................. 999
---------
$ 1,000
---------
---------
</TABLE>

The accompanying note is an integral part of the balance sheet.

F-3
<PAGE>
EXCEL LEGACY CORPORATION

NOTE TO BALANCE SHEET

FORMATION OF THE COMPANY:

Excel Legacy Corporation (the "Company"), a Delaware Corporation, was formed
on November 17, 1997 to own, operate and/or develop real estate. Certain real
estate assets ("Excel Legacy Corporation Asset Group") are planned to be
transferred from Excel Realty Trust, Inc. ("Excel") and ERT Development
Corporation ("EDV"), an unconsolidated affiliate of Excel, to the Company. In
September 1997, Excel's Board of Directors approved in principle, a plan for the
distribution (the "Distribution") of Company stock to holders of Excel common
stock. Excel is the sole stockholder of the Company and the Company is currently
considered a qualified REIT subsidiary of Excel.

The following assets are scheduled to be transferred to the Company:

- Ten single tenant free-standing buildings with a book value of $46.0
million and encumbered by mortgages of $34.7 million at October 31, 1997.

- A 670,000 square foot shopping mall located in Scottsdale, Arizona which
is substantially vacant. The Company intends to redevelop this property.
The book value is $14.2 million at October 31, 1997.

- Notes receivable related to development projects located in Arizona (3)
and California. The principal amount of the notes at October 31, 1997 is
$22.0 million.

As consideration for the transfers, the company will (a) issue to Excel a
significant number of shares of Company Common Stock to effect the Distribution,
and (b) execute a $25.3 million note payable to Excel. Other assets may be
transferred to the Company as the Boards of the Company and Excel deem
appropriate prior to the Distribution. The Company's authorized stock consists
of 1,000 shares of $.01 par value common stock and will be increased to provide
for the shares to be issued in connection with the Distribution.

The Company has obtained commitments to buy, effective upon consummation of
the Distribution. 9,195,224 shares of Company Common Stock in a private
placement to certain of the Company's officers at a price per share of $2.39 for
an aggregate purchase price of $22.0 million. The Company is also trying to
obtain commitments to purchase up to 40 million shares of Company Series A
Cumulative Convertible Preferred Stock ("Preferred Offering") in a private
placement to certain "qualified institutional buyers" (as such term is defined
in Rule 144A under the Securities Act of 1933, as amended), which shares will be
convertible at any time into shares of Company Common Stock. The aggregate
purchase price of the Preferred Offering will be up to $200 million or $5.00 per
share. At the balance sheet date no firm commitments for the Preferred Offering
had been received by the Company.

F-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Excel Legacy Corporation

We have audited the accompanying combined balance sheets of Excel Legacy
Corporation Asset Group (the "Portfolio"), as defined in Note 1, as of July 31,
1997 and 1996 and the related combined statements of operations, changes in
investment by Excel Realty Trust, Inc. and cash flows for each of the three
years in the period ended July 31, 1997. These financial statements are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Excel
Legacy Corporation Asset Group as of July 31, 1997 and 1996 and the combined
results of their operations and their cash flows for each of the three years in
the period ended July 31, 1997, in conformity with generally accepted accounting
principles.

As more fully described in Note 1, certain general and administrative
expenses were paid by Excel Realty Trust, Inc. and allocated to the Portfolio
principally based on Excel Realty Trust, Inc.'s specific identification of
individual cost items based upon estimated levels of effort devoted by its
corporate administrative departments. We have reviewed the methods and
documentation used in allocating such amounts and, in the circumstances, we
believe the methods used are reasonable and the documentation appropriate.
However, if the Portfolio had operated as a separate entity, actual expenses
might have been different.

COOPERS & LYBRAND L.L.P.

San Diego, California

November 24, 1997

F-5
<PAGE>
EXCEL LEGACY CORPORATION ASSET GROUP

COMBINED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1996 1997
--------- --------- OCTOBER 31,
1997
------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS

Real estate:
Land........................................................................ $ 15,324 $ 15,324 $ 15,324
Buildings................................................................... 34,789 34,789 34,789
Real estate under development............................................... 13,888 14,060 14,191
Accumulated depreciation.................................................... (2,953) (3,823) (4,040)
--------- --------- ------------
Net real estate........................................................... 61,048 60,350 60,264

Notes receivable.............................................................. 1,050 21,958 21,981
Interest receivable........................................................... 71 1,379 2,009
--------- --------- ------------
$ 62,169 $ 83,687 $ 84,254
--------- --------- ------------
--------- --------- ------------

LIABILITIES AND INVESTMENT BY EXCEL REALTY TRUST, INC.

Liabilities:
Mortgages payable........................................................... $ 36,754 $ 35,115 $ 34,657
Interest payable............................................................ 253 228 225
--------- --------- ------------
Total liabilities......................................................... 37,007 35,343 34,882

Commitments and contingencies................................................. -- -- --

Investment by Excel Realty Trust, Inc......................................... 25,162 48,344 49,372
--------- --------- ------------
$ 62,169 $ 83,687 $ 84,254
--------- --------- ------------
--------- --------- ------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6
<PAGE>
EXCEL LEGACY CORPORATION ASSET GROUP

COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JULY 31, OCTOBER 31,
------------------------------- --------------------
1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Rental revenue................................................. $ 5,897 $ 4,937 $ 4,937 $ 1,234 $ 1,234
Interest....................................................... -- 95 1,458 27 657
--------- --------- --------- --------- ---------
Total revenue................................................ 5,897 5,032 6,395 1,261 1,891
--------- --------- --------- --------- ---------
Operating expenses:
Interest....................................................... 3,185 3,080 2,896 755 680
Depreciation................................................... 870 870 870 218 217
Administrative expenses........................................ 548 563 799 146 163
--------- --------- --------- --------- ---------
Total operating expenses..................................... 4,603 4,513 4,565 1,119 1,060
--------- --------- --------- --------- ---------
Income before income taxes....................................... 1,294 519 1,830 142 831
Provision for income taxes....................................... 515 207 729 56 331
--------- --------- --------- --------- ---------
Net income..................................................... $ 779 $ 312 $ 1,101 $ 86 $ 500
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-7
<PAGE>
EXCEL LEGACY CORPORATION ASSET GROUP

COMBINED STATEMENTS OF CHANGES IN INVESTMENT BY
EXCEL REALTY TRUST, INC.
(IN THOUSANDS)

<TABLE>
<CAPTION>
<S> <C>
Investment by Excel Realty Trust, Inc. at August 1, 1994............................................... $ 17,441
Net income for the year ended July 31, 1995.......................................................... 779
Net return to Excel Realty Trust, Inc................................................................ (276)
---------
Investment by Excel Realty Trust, Inc. at July 31, 1995................................................ 17,944
Net income for the year ended July 31, 1996.......................................................... 312
Net investment by Excel Realty Trust, Inc............................................................ 6,906
---------
Investment by Excel Realty Trust, Inc. at July 31, 1996................................................ 25,162
Net income for the year ended July 31, 1997.......................................................... 1,101
Net investment by Excel Realty Trust, Inc............................................................ 22,081
---------
Investment by Excel Realty Trust, Inc. at July 31, 1997................................................ 48,344
Net income for the three months ended October 31, 1997 (unaudited)................................... 500
Net investment by Excel Realty Trust, Inc. (unaudited)............................................... 528
---------
Investment by Excel Realty Trust, Inc. at October 31, 1997 (unaudited)................................. $ 49,372
---------
---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-8
<PAGE>
EXCEL LEGACY CORPORATION ASSET GROUP

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JULY 31, OCTOBER 31,
-------------------------------- --------------------
1995 1996 1997 1996 1997
--------- --------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 779 $ 312 $ 1,101 $ 86 $ 500
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation......................................... 870 870 870 217 217
Change in interest receivable........................ -- (71) (1,308) (26) (631)
Change in interest payable........................... (8) (9) (24) (2) (3)
--------- --------- ---------- --------- ---------
Net cash provided by operating activities.............. 1,641 1,102 639 275 83
--------- --------- ---------- --------- ---------
Cash flows from investing activities:
Net costs paid on real estate held for development..... -- (5,488) (171) 315 (132)
Advances for notes receivable.......................... -- (1,050) (20,908) -- (23)
--------- --------- ---------- --------- ---------
Net cash provided by (used in) investing activities.... -- (6,538) (21,079) 315 (155)
--------- --------- ---------- --------- ---------
Cash flows from financing activities:
Principal payments of mortgages payable................ (1,365) (1,470) (1,641) (361) (456)
Net investment by Excel Realty Trust, Inc.............. (276) 6,906 22,081 (229) 528
--------- --------- ---------- --------- ---------
Net cash provided by (used in) financing activities.... (1,641) 5,436 20,440 (590) 72
--------- --------- ---------- --------- ---------
Net increase in cash..................................... -- -- -- -- --
Cash at beginning of period.............................. -- -- -- -- --
--------- --------- ---------- --------- ---------
Cash at end of period.................................... $ -- $ -- $ -- $ -- $ --
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-9
<PAGE>
EXCEL LEGACY CORPORATION ASSET GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION:

FORMATION OF THE COMPANY

The following assets are scheduled to be transferred to the Company:

- Ten single tenant free-standing buildings with a book value of $46.0
million and encumbered by mortgages of $34.7 million at October 31, 1997.

- Four notes receivable related to development projects located in Arizona
(3) and California. The principal amount of the notes at October 31, 1997
is $22.0 million.

Other assets may be transferred to the Company as the Boards of the Company
and Excel deem appropriate. The Company's authorized stock consists of 1,000
shares of $.01 par value common stock and will be increased to provide for the
shares to be issued in connection with the Distribution.

BASIS OF PRESENTATION

These financial statements present the financial position, results of
operations, and cash flows for the Excel Legacy Corporation Asset Group,
hereafter referred to as the Company, as if it were a separate entity of Excel
for all periods presented. Excel and EDV's historical basis in the assets and
liabilities has been carried over. Changes in investment by Excel represent the
net income of the Company plus the net change in cash and non-cash items
transferred between the Company and Excel.

The combined financial statements include assets, liabilities and operations
to be transferred to the Company in connection with the acquisition of assets
from Excel and EDV. All significant intercompany accounts have been eliminated.
Certain general and administrative expenses were paid by Excel and allocated to
the Company, principally based on Excel's specific identification of individual
cost items based upon estimated levels of effort devoted by its corporate
administrative departments. Expense amounts allocated to administrative expenses
were $799,000, $563,000 and $548,000 for each of the years ended July 31, 1997,
1996 and 1995, respectively, and $163,000 and $146,000 for each of the three
month periods ended October 31, 1997 and 1996, respectively. In the opinion of
management, the methods for allocating corporate administrative expenses are
reasonable.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

REAL ESTATE

Land, buildings and real estate under development are recorded at cost.
Depreciation is computed using the straight-line method over estimated useful
lives of 40 years for buildings. Expenditures for

F-10
<PAGE>
EXCEL LEGACY CORPORATION ASSET GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
maintenance and repairs are charged to expense as incurred and significant
renovations are capitalized. Direct costs incurred for properties under
development or redevelopment are capitalized and depreciation is not charged to
the property until the project is completed.

The Company assesses whether there has been a permanent impairment in the
value of its real estate by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's ability
to pay rent under the terms of the lease. If these factors indicate that there
has been a permanent impairment in the value of its real estate, the Company
estimates the future cash flows expected to result from the operations of the
property and its eventual disposition. If the sum of the expected future cash
flows (undiscounted and without interest charges) is less than the carrying
amount of the property, the Company will recognize a permanent impairment loss,
equal to the amount by which the carrying amount of the property exceeds the
fair value of the property.

INCOME TAXES

The Company's income tax provision is determined as if the Company had paid
income tax on taxable income on a separate company basis. Taxes payable are
charged directly against the investment by Excel. The Company's income tax
provision, all of which is current, is based on income before taxes. Deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities of their financial
reporting amounts at each year end based on enacted laws and statutory tax rates
applicable to the years in which the differences are expected to affect taxable
income. There are no significant timing differences between financial reporting
and taxable income and as such, the Company has not recorded any deferred income
tax assets or liabilities.

REVENUE RECOGNITION

Base rental revenue is recognized on the straight-line basis, which averages
annual minimum rents over the terms of the leases. The leases also provide that
the tenant directly pay all of the common area maintenance and other operating
expenses.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.

CONCENTRATION OF CREDIT RISK

As of October 31, 1997, eight of the ten operating properties held by the
Company are leased to Wal-Mart. Rents from these stores account for
approximately 76% of the Company's scheduled rental revenue. The remaining two
operating properties, which account for the remaining 24% of scheduled rental
revenue, are leased to Lowe's. While the financial position of the Company may
be adversely affected by financial difficulties experienced by Wal-Mart, the
Company has not experienced any such events. Wal-Mart and Lowe's are
publicly-traded companies, and financial and other information regarding their
leases is on file with the Securities and Exchange Commission.

F-11
<PAGE>
EXCEL LEGACY CORPORATION ASSET GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Additionally, two of the Company's notes receivable which account for 95% of
the Company's scheduled interest revenue at October 31, 1997 are with the same
developer. EDV is committed to provide up to approximately $9,000,000 in
additional advances related to these notes.

INTERIM FINANCIAL INFORMATION

The accompanying financial statements as of October 31, 1997 and the three
months ended October 31, 1997 and 1996 are unaudited but include all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair statement of the financial position and the operating
results and cash flows of such periods. Interim results are not necessarily
indicative of results for the entire year or future periods.

3. REAL ESTATE:

The financial statements include ten single tenant free-standing buildings
which are located in Colorado, Illinois, Indiana (3), Michigan, Ohio,
Pennsylvania, Texas, and Wisconsin. Eight of the buildings are leased by
Wal-Mart and two of the buildings are leased by Lowe's.

REAL ESTATE UNDER DEVELOPMENT

In preparation for the redevelopment of a property located in Scottsdale,
Arizona, the Company terminated a master lease to an unaffiliated developer on
August 1, 1995. As part of the termination agreement, the Company paid the
lessee in exchange for the lessee's equity participation rights in the property,
$5,000,000 which was capitalized as part of the asset held for sale.
Depreciation expense is no longer being charged to the property and costs
incurred during redevelopment are being capitalized.

4. NOTES RECEIVABLE:

The Company holds a $16,593,000 mortgage loan receivable from a developer
and owner of a shopping center located in Scottsdale, Arizona. The borrower
intends to redevelop the property through the acquisition of adjoining parcels
and the construction of certain improvements. The loan was originated in
December 1996, and matures upon the sale of the property and bears interest at
the rate of 12%. In addition, the borrower must pay the Company a "profits
participation" equal to 50% of the profits generated by the property. The loan
is non-recourse and repayment of the loan is collateralized by a first mortgage
on the property. Interest receivable at October 31, 1997, July 31, 1997 and July
31, 1996 is $1,674,000, $1,193,000 and $0, respectively.

The Company holds a $4,290,000 promissory note receivable from a developer
and owner of an eight story office building in downtown Phoenix, Arizona. The
loan was originated in May 1997 and matures upon the sale of the property by the
borrower. Until maturity, the loan bears interest at 11% per annum. In addition,
the borrower must pay the Company a "profits participation" equal to 50% of the
profits generated by the property. The loan is non-recourse and repayment of the
loan is collateralized by a first mortgage on the property. Interest receivable
was $205,000, $84,000 and $0 at October 31, 1997, July 31, 1997 and July 31,
1996, respectively.

The Company holds a $1,050,000 promissory note receivable from an owner of a
land parcel located in Arizona. The loan originated in October 1995 and matures
in September 1998. Until the maturity date, the borrower is to pay interest at
the rate of 7% per annum. In addition, upon maturity, prepayment or

F-12
<PAGE>
EXCEL LEGACY CORPORATION ASSET GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

4. NOTES RECEIVABLE: (CONTINUED)
acceleration of the note, the borrower must pay additional interest from October
1995 on the principal amount of the note at the rate of 3% per annum. The note
is non-recourse and repayment of the loan is collateralized by a first mortgage
on the property.

At October 31, 1997, the Company has approximately $48,000 in notes
receivable from a developer relating to predevelopment expenses of a property
located in San Diego, California. The outstanding amounts related to these
advances bear interest at the rate of 12%. EDV is committed to provide up to
$2,500,000 in total advances related to this project.

5. MORTGAGES PAYABLE:

The Company's single free-standing buildings are all encumbered by
mortgages. Interest rates on the properties range from 7.625% to 8.75% and
mature on various dates to 2014. Monthly payments at October 31, 1997 total
$380,000. The loans are non-recourse and repayment of the loans by the Company
is collateralized by a first mortgage on the properties.

The principal payments required to be made on mortgages payable are as
follows (in thousands):

<TABLE>
<CAPTION>
YEAR
- -----------------------------------------------------------------------------------
<S> <C>
1998, remaining nine months:....................................................... $ 1,448
1999............................................................................... 2,077
2000............................................................................... 2,240
2001............................................................................... 2,417
2002............................................................................... 2,614
Thereafter......................................................................... 23,861
---------
$ 34,657
---------
---------
</TABLE>

6. MINIMUM FUTURE RENTALS:

The Company leases its single free-standing buildings to tenants under
noncancellable operating leases requiring the tenant to pay a minimum rent. The
leases require the tenant to pay all expenses of operating the property such as
insurance, property taxes, and structural repairs and maintenance. Minimum
future rental revenue for the next five years is as follows (in thousands):

<TABLE>
<CAPTION>
YEAR
- -----------------------------------------------------------------------------------
<S> <C>
1998, remaining nine months:....................................................... $ 3,704
1999............................................................................... 4,939
2000............................................................................... 4,939
2001............................................................................... 4,939
2002............................................................................... 4,939
Thereafter......................................................................... 36,836
---------
$ 60,296
---------
---------
</TABLE>

F-13
<PAGE>
EXCEL LEGACY CORPORATION ASSET GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

7. NEW PRONOUNCEMENTS:

In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings per Share and SFAS No.
129, Disclosure of Information about Capital Structure, which become effective
for periods after December 15, 1997 and SFAS No. 131, Disclosures about Segments
in an Enterprise and Related Information and SFAS No. 130, Comprehensive Income,
which become effective in 1998. The Company has determined that the adoption of
these SFASs will not have a material effect on the consolidated financial
statements.

F-14
<PAGE>
ANNEX I
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EXCEL LEGACY CORPORATION

EXCEL LEGACY CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:

1. The Corporation's original Certificate of Incorporation was filed on
November 17, 1997.

2. That by action taken by unanimous written consent of the Board of
Directors on , 1998, resolutions were duly adopted setting forth a
proposed amendment and restatement of the Certificate of Incorporation of the
Corporation, declaring said amendment and restatement to be advisable and
directing its officers to submit said amendment and restatement to the sole
stockholder of the Corporation for consideration thereof. The resolution setting
forth the proposed amendment and restatement is as follows:

"RESOLVED, that the Certificate of Incorporation of the Corporation is
hereby amended to read in its entirety as follows, subject to the required
consent of the sole stockholder of the corporation:

FIRST: The name of the Corporation is Excel Legacy Corporation
(hereinafter the "Corporation").

SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.

THIRD: The purpose of the Corporation is (i) to perform an agreement
(the "Intercompany Agreement") to be entered into by and between the
Corporation and Excel Realty Trust, Inc., a Maryland corporation ("Excel"),
pursuant to which the Corporation and Excel will provide each other with
rights to participate in certain transactions for so long as the
Intercompany Agreement remains in effect, and (ii) subject to the terms and
conditions set forth in the Intercompany Agreement, to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware (the "GCL").

FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is 200,000,000, which shall consist of
150,000,000 shares of Common Stock, each having a par value of $.01 (the
"Common Stock"), and 50,000,000 shares of Preferred Stock, each having a par
value of $.01 (the "Preferred Stock").

The Board of Directors is hereby authorized from time to time to provide
by resolution for the issuance of shares of preferred stock in one of more
series not exceeding in the aggregate the number of shares of Preferred
Stock authorized by this Certificate of Incorporation, as amended from time
to time; and to determine with respect to each such series the voting
powers, if any (which voting powers, if granted, may be full or limited),
designations, preference and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions relating
thereto, including without limiting the generality of the foregoing, the
voting rights relating to shares of Preferred Stock of any series (which may
be one of more votes per share or a fraction of a vote per share, which may
vary over time and which may be applicable generally or only upon the
happening and continuance of stated events or conditions), the rate of
dividend to which holders of Preferred Stock of any series may be entitled
(which may be cumulative or noncumulative), the rights of holders of
Preferred Stock of

I-1
<PAGE>
any series in the event of liquidation, dissolution or winding up of the
affairs of the Corporation, the rights, if any, of holders of Preferred
Stock of any series to convert or exchange such shares of Preferred Stock of
such series for shares of any other class or series of capital stock or for
any other securities, property or assets of the Corporation or any
subsidiary (including the determination of the price or prices or the rate
or rates applicable to such rights to convert or exchange and the adjustment
thereof, the time or times during which the right to convert or exchange
shall be applicable and the time or times during which a particular price or
rate shall be applicable), whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable,
and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates, and
whether any shares of that series shall be redeemed pursuant to a retirement
or sinking fund or otherwise and the terms and conditions of such
obligation.

Before the Corporation shall issue any shares of Preferred Stock of any
series, a certificate setting forth a copy of the resolution or resolutions
of the Board of Directors, fixing the voting powers, designations,
preferences, the relative, participating, optional or other rights, if any,
and the qualifications, limitations and restrictions, if any, relating to
the shares of Preferred Stock of such series, and the number of shares of
Preferred Stock of such series authorized by the Board of Directors to be
issued shall be made under seal of the Corporation and signed by and shall
be filed and a copy thereof recorded in the manner prescribed by the GCL.
The Board of Directors is further authorized to increase or decrease (but
not below the number of such shares of such series then outstanding) the
number of shares of any series subsequent to the issuance of shares of that
series.

FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and
of its directors and stockholders:

(a) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.

(b) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the Bylaws of the Corporation.

(c) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the Bylaws of the Corporation.
The election of directors need not be by written ballot unless the Bylaws so
provide.

(d) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the
GCL, this Certificate of Incorporation, and any Bylaws adopted by the
stockholders; PROVIDED, HOWEVER, that no Bylaws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would
have been valid if such Bylaws had not been adopted.

SIXTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the Corporation may be
kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of the Corporation.

SEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Corporation in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.

EIGHTH: (a) Subject to Article EIGHTH (c), the Corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed

I-2
<PAGE>
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

(b) Subject to Article EIGHTH (c), the Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he
is or was a director or officer of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.

(c) Any indemnification under this Article EIGHTH (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director or officer is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Article EIGHTH (a) or Article EIGHTH (b), as the case
may be. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (ii) if such a quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent, however, that a present or former director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Article EIGHTH (a)
or Article EIGHTH (b), or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith, without the
necessity of authorization in the specific case.

(d) Notwithstanding any contrary determination in the specific case
under Article EIGHTH (c), and notwithstanding the absence of any
determination thereunder, any present or former director or officer of the
Corporation may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under
Article EIGHTH (a) and Article EIGHTH (b). The basis of such indemnification
by a court shall be a determination by such court that indemnification of
such person is proper in the circumstances because he has met the applicable
standards of conduct set forth in Article EIGHTH (a) or Article EIGHTH (b),
as the case may be. Neither a contrary determination in the specific case
under Article EIGHTH (c) nor the absence of

I-3
<PAGE>
any determination thereunder shall be a defense to such application or
create a presumption that such person seeking indemnification has not met
any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Article EIGHTH (d) shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, such person seeking indemnification shall also be entitled
to be paid the expense of prosecuting such application.

(e) Expenses incurred by a person who is or was a director or officer of
the Corporation in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article EIGHTH.

(f) The indemnification and advancement of expenses provided by or
granted pursuant to this Article EIGHTH shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under any Bylaw, agreement, contract, vote of
stockholders or disinterested directors or pursuant to the direction
(howsoever embodied) of any court of competent jurisdiction or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office, it being the policy of the Corporation
that indemnification of the persons specified in Article EIGHTH (a) and
Article EIGHTH (b) shall be made to the fullest extent permitted by law. The
provisions of this Article EIGHTH shall not be deemed to preclude the
indemnification of any person who is not specified in Article EIGHTH (a) or
Article EIGHTH (b) but whom the Corporation has the power or obligation to
indemnify under the provisions of the GCL, or otherwise.

(g) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power or the obligation
to indemnify him against such liability under the provisions of this Article
EIGHTH or Section 145 of the GCL.

(h) For purposes of this Article EIGHTH, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors or officers,
so that any person who is or was a director or officer of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, shall stand in the same position under the provisions of
this Article EIGHTH with respect to the resulting or surviving corporation
as he would have with respect to such constituent corporation if its
separate existence had continued. For purposes of this Article EIGHTH,
references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such person with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and
in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article EIGHTH. For purposes of any determination under
Article EIGHTH (c), a person shall be deemed to have acted in good faith in
a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to

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him by the officers of the Corporation or another enterprise in the course
of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care
by the Corporation or another enterprise. The term "another enterprise" is
used in this Article EIGHTH (h) shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise
of which such person is or was serving at the request of the Corporation as
a director, officer, employee or agent. The provisions of this Article
EIGHTH (h) shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Article EIGHTH (a) or (b), as the case may
be.

(i) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article EIGHTH shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director or officer of the Corporation and shall inure to the benefit of the
heirs, executors and administrators of such a person.

(j) Notwithstanding anything contained in this Article EIGHTH to the
contrary, except for proceedings to enforce rights to indemnification (which
shall be governed by Article EIGHTH (d)), the Corporation shall not be
obligated to indemnify any person in connection with a proceeding (or part,
thereof) initiated by such person unless such proceeding (or part thereof)
was authorized or consented to by the Board of Directors of the Corporation.

(k) The Corporation may, to the extent authorized from time to time by
the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar
to those conferred in this Article EIGHTH to directors and officers of the
Corporation.

NINTH: No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article NINTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification."

3. That thereafter, by consent of the sole stockholder of all of the issued
and outstanding shares of stock of the Corporation in accordance with Section
228 of the General Corporation Law of the State of Delaware, all of the shares
of the Corporation were voted in favor of the amendment.

4. That said Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.

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<PAGE>
IN WITNESS WHEREOF, EXCEL LEGACY CORPORATION has caused this Certificate to
be signed by Gary B. Sabin, its President and Richard B. Muir, its Secretary,
this day of , 1998.

EXCEL LEGACY CORPORATION,
a Delaware corporation

By:
--------------------------------------
Name: Gary B. Sabin
Title: President

ATTEST

- -------------------------------------------
Name: Richard B. Muir
Title: Secretary

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<PAGE>
ANNEX II
AMENDED AND RESTATED
BYLAWS
OF
EXCEL LEGACY CORPORATION
(HEREINAFTER CALLED THE "CORPORATION")
ARTICLE I
OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of the Corporation
shall be established and maintained in the City of Wilmington, County of New
Castle, State of Delaware.

SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.

SECTION 2. ANNUAL MEETINGS. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which meeting
the stockholders shall elect Directors in the manner provided in the Certificate
of Incorporation and in the Bylaws, and transact such other business as may
properly be brought before the meeting. Written notice of the Annual Meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.

SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of Stockholders, for any purpose
or purposes may be called by either (i) the Chairman, (ii) the Vice Chairman,
(iii) the President, (iv) any Vice President, (v) the Secretary or (vi) any
Assistant Secretary, if there be one, and shall be called by any such officer at
the request in writing by a majority of the entire Board of Directors, or at the
request in writing of stockholders owning a majority of the capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. Written notice of a
Special Meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder entitled
to vote at such meeting.

SECTION 4. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum and
the votes present may continue to transact business until adjournment. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or

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represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.

SECTION 5. VOTING. Unless otherwise required by law, the Certificate of
Incorporation or these Bylaws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such votes
may be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.

SECTION 6. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the Corporation,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.

SECTION 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.

SECTION 8. STOCK LEDGER. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.

ARTICLE III

DIRECTORS

SECTION 1. NUMBER AND ELECTION OF DIRECTORS. The Board of Directors shall
consist of three or more members, the exact number of which shall be fixed from
time to time by the Board of Directors. Except as provided in Section 2 of this
Article, directors shall be elected by a plurality of the votes cast at Annual
Meetings of Stockholders, and each director so elected shall hold office until
the Annual Meeting in which his term expires and until his successor is duly
elected and qualified, or until his earlier resignation or removal. Any director
may resign at any time upon written notice to the Corporation. Directors need
not be stockholders.

SECTION 2. VACANCIES. Vacancies, and newly created directorships resulting
from any increase in the authorized number of directors, may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. The directors so chosen shall hold office until the
next annual election of directors and until their successors are duly elected
and qualified, or until their earlier

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resignation or removal. If there are no directors in office, then an election of
directors may be held in the manner provided by statute.

SECTION 3. DUTIES AND POWERS. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.

SECTION 4. MEETINGS. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, the Vice Chairman, the President, or any director. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail, telephone, facsimile or telegram not less than forty-eight (48)
hours before the date of the meeting.

SECTION 5. QUORUM. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these Bylaws, at all meetings of the
Board of Directors a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business. The act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time without notice other than announcement at the meeting, until a quorum shall
be present.

SECTION 6. ACTIONS OF BOARD. Unless otherwise provided by the Certificate
of Incorporation or these Bylaws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.

SECTION 7. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.

SECTION 8. COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the Directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. Any committee, to the extent allowed by law and
provided in these Bylaws or the resolution establishing such committee, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation; but no committee
shall have the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
Bylaws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provides, no committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Each
committee shall keep regular minutes and report to the Board of Directors when
required.

SECTION 9. COMPENSATION. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the

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Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.

SECTION 10. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
that reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction. Any
such contract or transaction shall be made on commercially reasonable terms
substantially equivalent to terms available from third parties in an
arm's-length transaction in the competitive marketplace.

ARTICLE IV

OFFICERS

SECTION 1. GENERAL. The executive officers of the Corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board of
Directors, a President and Chief Executive Officer, a Secretary and a Chief
Financial Officer. The Board of Directors, in its discretion, may also choose
one or more Executive Vice Presidents (each of whom shall also be an executive
officer), a Treasurer (who shall also be an executive officer) and Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law, the Certificate of Incorporation or these Bylaws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors and the Vice Chairman of the Board of
Directors, need such officers be directors of the Corporation.

SECTION 2. ELECTION. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the entire Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by a majority
of the entire Board of Directors. The salaries of all executive officers of the
Corporation shall be fixed by the Board of Directors.

SECTION 3. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors shall preside at all meetings of the stockholders and of the Board
of Directors. Except where by law the signature of the President is required,
the Chairman of the Board of Directors shall possess the same power as the
President to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board of Directors
shall exercise all the powers and discharge all the duties of the President. The
Chairman of the Board of Directors shall also perform such other duties and may
exercise

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such other powers as from time to time may be assigned to him by these Bylaws or
by the Board of Directors. The Chairman of the Board of Directors may only be
appointed or removed by a majority of the entire Board of Directors.

SECTION 4. VICE CHAIRMAN OF THE BOARD OF DIRECTORS. The Vice Chairman of
the Board of Directors shall, in the absence or disability of the Chairman of
the Board of Directors, preside at meetings of the stockholders and the Board of
Directors. The Vice Chairman of the Board of Directors shall also perform such
other duties and may exercise such other powers as from time to time may be
assigned to him by these Bylaws or by the Board of Directors.

SECTION 5. PRESIDENT. The President shall, subject to the control of the
Board of Directors, have general supervision of the business of the Corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. He shall execute all bonds, mortgages, contracts and other
instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these Bylaws, the Board of Directors or
the President. In the absence or disability of the Chairman of the Board of
Directors or the Vice Chairman of the Board of Directors, or if there be none,
the President shall preside at all meetings of the stockholders and the Board of
Directors. The President shall also perform such other duties and may exercise
such other powers as from time to time may be assigned to him by these Bylaws or
by the Board of Directors. The President may only be appointed or removed by a
majority of the entire Board of Directors.

SECTION 6. EXECUTIVE VICE PRESIDENTS AND VICE PRESIDENTS. At the request
of the President or in his absence or in the event of his inability or refusal
to act (and if there be no Chairman of the Board of Directors), the Senior
Executive Vice President, and then the Executive Vice President or the Executive
Vice Presidents if there is more than one (in the order designated by the Board
of Directors) shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. Each Vice President (including Senior Executive and Executive Vice
Presidents) shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President.

SECTION 7. SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he or she shall be. If the Secretary shall be unable or shall refuse
to cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, then
either the Board of Directors or the President may choose another officer to
cause such notice to be given. The Secretary shall have custody of the seal of
the Corporation and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.

SECTION 8. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall also
serve as the Treasurer unless Treasurer shall be separately appointed by the
Board of Directors and shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in

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books belonging to the Corporation and shall deposit all moneys and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Chief Financial
Officer shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Chief Financial Officer and of the financial condition of the Corporation.

SECTION 9. ASSISTANT SECRETARIES. Except as may be otherwise provided in
these Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, any Vice President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his disability
or refusal to act, shall perform the duties of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.

SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President if
there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer.

SECTION 11. OTHER OFFICERS. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.

ARTICLE V

STOCK

SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman or Vice Chairman of the Board of Directors, or the President
or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation. If the Corporation shall be authorized
to issue more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations, or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the Corporation shall issue to
represent such class or series of stock, a statement that the Corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.

SECTION 2. SIGNATURES. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed, or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.

SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or

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destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost stolen or destroyed (unless otherwise
authorized by the Board). When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.

SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.

SECTION 5. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.

ARTICLE VI

NOTICES

SECTION 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex, facsimile or cable, in which event notice shall be deemed
given upon receipt.

SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Neither the business
transacted or to be transacted at, nor the purpose of any meeting need be
specified in any written waiver of notice thereof.

ARTICLE VII

GENERAL PROVISIONS

SECTION 1. DIVIDENDS. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any

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regular or special meeting, and may be paid in cash, in property, or in shares
of the capital stock. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.

SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.

SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.

SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE VIII

INDEMNIFICATION

The power, right and obligation of the Corporation to indemnify any director
or officer of the Corporation and employees and agents of the Corporation shall
be as set forth in Article EIGHTH of the Certificate of Incorporation. All
directors and officers of the Corporation shall be entitled to indemnification
as set forth in the Certificate of Incorporation.

ARTICLE IX

AMENDMENTS

SECTION 1. These Bylaws may be altered, amended or repealed, in whole or in
part, or new Bylaws may be adopted by the stockholders or by the Board of
Directors; provided, however, that notice of such alteration, amendment, repeal
or adoption of new Bylaws be contained in the notice of such meeting of
stockholders or Board of Directors as the case may be. All such amendments must
be approved by either the holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the entire Board of Directors.

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<PAGE>
ANNEX III
THE 1998 STOCK OPTION PLAN
OF
EXCEL LEGACY CORPORATION

Excel Legacy Corporation, a Delaware corporation, has adopted The 1998 Stock
Option Plan of Excel Legacy Corporation (this "Plan"), effective ,
1998, for the benefit of its eligible employees, consultants and directors.

The purposes of this Plan are as follows:

(1) To provide an additional incentive for directors, key Employees and
consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock which
recognizes such growth, development and financial success.

(2) To enable the Company to obtain and retain the services of directors,
key Employees and consultants considered essential to the long range success of
the Company by offering them an opportunity to own stock in the Company which
will reflect the growth, development and financial success of the Company.

ARTICLE I

DEFINITIONS

1.1 GENERAL. Wherever the following terms are used in this Plan they shall
have the meanings specified below, unless the context clearly indicates
otherwise.

1.2 AWARD LIMIT. "Award Limit" shall mean 525,000 shares of Common Stock,
as adjusted pursuant to Section 7.3.

1.3 BOARD. "Board" shall mean the Board of Directors of the Company.

1.4 CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended.

1.5 COMMITTEE. "Committee" shall mean the Compensation Committee of the
Board, or another committee or subcommittee of the Board, appointed as provided
in Section 6.1.

1.6 COMMON STOCK. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share.

1.7 COMPANY. "Company" shall mean Excel Legacy Corporation, a Delaware
corporation.

1.8 CORPORATE TRANSACTION. "Corporate Transaction" shall mean any of the
following stockholder-approved transactions to which the Company is a party:

(a) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the
State in which the Company is incorporated, form a holding company or effect a
similar reorganization as to form whereupon this Plan and all Options are
assumed by the successor entity;

(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a), above; or

(c) any reverse merger in which the Company is the surviving entity but in
which securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities are transferred or issued
to a person or persons different from those who held such securities immediately
prior to such merger.

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<PAGE>
1.9 DIRECTOR. "Director" shall mean a member of the Board.

1.10 DISTRIBUTION. "Distribution" shall mean the distribution of Common
Stock to the stockholders of Excel Realty Trust, Inc.

1.11 EMPLOYEE. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.

1.12 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.

1.13 FAIR MARKET VALUE. "Fair Market Value" of a share of Common Stock as
of a given date shall be (i) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (ii) if Common Stock is not traded on an exchange but is
quoted on Nasdaq or a successor quotation system, the closing price of a share
of Common Stock on the trading day previous to such date as reported by Nasdaq
or such successor quotation system; or (iii) if Common Stock is not publicly
traded on an exchange and not quoted on Nasdaq or a successor quotation system,
the Fair Market Value of a share of Common Stock as established by the Committee
(or the Board, in the case of Options granted to Directors) acting in good
faith.

1.14 INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean an option
which conforms to the applicable provisions of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Committee.

1.15 INDEPENDENT DIRECTOR. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.

1.16 NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee.

1.17 OPTION. "Option" shall mean a stock option granted under Article III
of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
PROVIDED, HOWEVER, that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.

1.18 OPTIONEE. "Optionee" shall mean an Employee, consultant or Director
granted an Option under this Plan.

1.19 PLAN. "Plan" shall mean The 1998 Stock Option Plan of Excel Legacy
Corporation.

1.20 QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.

1.21 RULE 16B-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.

1.22 SECTION 162(M) PARTICIPANT. "Section 162(m) Participant" shall mean
any key Employee designated by the Committee as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.

1.23 SUBSIDIARY. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.

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<PAGE>
1.24 TERMINATION OF CONSULTANCY. "Termination of Consultancy" shall mean
the time when the engagement of an Optionee as a consultant to the Company or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death or retirement; but
excluding terminations where there is a simultaneous commencement of employment
with the Company or any Subsidiary. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Consultancy, including, but not by way of limitation, the question of whether
a Termination of Consultancy resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination of
Consultancy. Notwithstanding any other provision of this Plan, the Company or
any Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.

1.25 TERMINATION OF DIRECTORSHIP. "Termination of Directorship" shall mean
the time when an Optionee who is a Director ceases to be a Director for any
reason, including, but not by way of limitation, a termination by resignation,
failure to be elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Directors.

1.26 TERMINATION OF EMPLOYMENT. "Termination of Employment" shall mean the
time when the employee-employer relationship between an Optionee and the Company
or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment; PROVIDED, HOWEVER, that, unless
otherwise determined by the Committee in its discretion, a leave of absence,
change in status from an employee to an independent contractor or other change
in the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that with respect to Incentive Stock Options,
such leave of absence, change in status or other change interrupts employment
for the purposes of Section 422(a)(2) of the Code and the then applicable
regulations and revenue rulings under said Section. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.

ARTICLE II

SHARES SUBJECT TO PLAN

2.1 SHARES SUBJECT TO PLAN.

(a) The shares of stock subject to Options shall be Common Stock. The
aggregate number of such shares which may be issued upon exercise of such
Options or rights or upon any such awards under the Plan shall not exceed
5,250,380. The shares of Common Stock issuable upon exercise of such Options may
be either previously authorized but unissued shares or treasury shares.

(b) The maximum number of shares which may be subject to Options granted
under the Plan to any individual in any fiscal year shall not exceed the Award
Limit. To the extent required by Section 162(m) of the Code, shares subject to
Options which are canceled continue to be counted against the Award Limit and
if, after grant of an Option, the price of shares subject to such Option is
reduced, the transaction is

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<PAGE>
treated as a cancellation of the Option and a grant of a new Option and both the
Option deemed to be canceled and the Option deemed to be granted are counted
against the Award Limit.

2.2 ADD-BACK OF OPTIONS. If any Option to acquire shares of Common Stock
under this Plan expires or is canceled without having been fully exercised, or
is exercised in whole or in part for cash as permitted by this Plan, the number
of shares subject to such Option but as to which such Option was not exercised
prior to its expiration, cancellation or exercise may again be optioned
hereunder, subject to the limitations of Section 2.1. Furthermore, any shares
subject to Options which are adjusted pursuant to Section 7.3 and become
exercisable with respect to shares of stock of another corporation shall be
considered cancelled and may again be optioned hereunder, subject to the
limitations of Section 2.1. Shares of Common Stock which are delivered by the
Optionee or withheld by the Company upon the exercise of any Option under this
Plan, in payment of the exercise price thereof, may again be optioned hereunder,
subject to the limitations of Section 2.1. Notwithstanding the provisions of
this Section 2.2, no shares of Common Stock may again be optioned if such action
would cause an Incentive Stock Option to fail to qualify as an incentive stock
option under Section 422 of the Code.

ARTICLE III

GRANTING OF OPTIONS

3.1 ELIGIBILITY. Any Employee or consultant selected by the Committee
pursuant to Section 3.4(a)(i) shall be eligible to be granted an Option. Each
Director of the Company shall be eligible to be granted Options at the times and
in the manner set forth in Section 3.4(d).

3.2 DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.

3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock Option
shall be granted to any person who is not an Employee.

3.4 GRANTING OF OPTIONS

(a) The Committee shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:

(i) Determine which Employees are key Employees and select from among
the key Employees or consultants (including Employees or consultants who
have previously received Options under this Plan) such of them as in its
opinion should be granted Options;

(ii) Subject to the Award Limit, determine the number of shares to be
subject to such Options granted to the selected key Employees or
consultants;

(iii) Subject to Section 3.3, determine whether such Options are to be
Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and

(iv) Determine the terms and conditions of such Options, consistent with
this Plan; PROVIDED, HOWEVER, that the terms and conditions of Options
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code.

(b) Upon the selection of a key Employee or consultant to be granted an
Option, the Committee shall instruct the Chief Executive Officer of the Company
to issue the Option and may impose such

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<PAGE>
conditions on the grant of the Option as it deems appropriate. Without limiting
the generality of the preceding sentence, the Committee may, in its discretion
and on such terms as it deems appropriate, require as a condition on the grant
of an Option to an Employee or consultant that the Employee or consultant
surrender for cancellation some or all of the unexercised Options or other
rights which have been previously granted to him under this Plan or otherwise.
An Option, the grant of which is conditioned upon such surrender, may have an
Option price lower (or higher) than the exercise price of such surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in accordance with
its terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.

(c) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such option from treatment as an "incentive stock
option" under Section 422 of the Code.

(d) During the term of the Plan, each person who is a Director as of the
date of the Distribution automatically shall be granted an Option to purchase
( ) shares of Common Stock (subject to adjustment as provided in
Section 7.3) on the date of each annual meeting of stockholders after such
Distribution at which the Director is reelected to the Board. During the term of
the Plan, a person who is initially elected to the Board after the consummation
of the Distribution and who is a Director at the time of such initial election
automatically shall be granted an Option to purchase ( ) shares of
Common Stock (subject to adjustment as provided in Section 7.3) on the date of
each annual meeting of stockholders after such initial election at which the
Director is reelected to the Board. Members of the Board who are employees of
the Company who subsequently retire from the Company and remain on the Board, to
the extent that they are otherwise eligible, will receive, after retirement from
employment with the Company, Options as described in the preceding sentence.

ARTICLE IV

TERMS OF OPTIONS

4.1 OPTION AGREEMENT. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee (or the Board, in the case of Options granted to Directors) shall
determine, consistent with this Plan. Stock Option Agreements evidencing Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code. Stock
Option Agreements evidencing Incentive Stock Options shall contain such terms
and conditions as may be necessary to meet the applicable provisions of Section
422 of the Code.

4.2 OPTION PRICE. The price per share of the shares subject to each Option
shall be set by the Committee; PROVIDED, HOWEVER, that such price shall be no
less than the par value of a share of Common Stock, unless otherwise permitted
by applicable state law, and (i) in the case of Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code,
such price shall not be less than 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted; (ii) in the case of Incentive
Stock Options such price shall not be less than 100% of the Fair Market Value of
a share of Common Stock on the date the Option is granted (or the date the
Option is modified, extended or renewed for purposes of Section 424(h) of the
Code); (iii) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code), such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date the Option is granted (or the date the Option
is modified, extended or renewed for purposes of Section 424(h) of the Code);
and (iv) in the case of Options granted to Directors, such price shall equal
100% of the Fair Market Value of a share

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of Common Stock on the date the Option is granted; PROVIDED, HOWEVER, that the
price of each share subject to each Option granted to Directors on the date of
the Distribution shall equal the average of the trading price for the Common
Stock for the twenty days commencing on the sixth day after the effective date
of the Distribution.

4.3 OPTION TERM. The term of an Option shall be set by the Committee in
its discretion; PROVIDED, HOWEVER, that, (i) in the case of Options granted to
Directors, the term shall be ten (10) years from the date the Option is granted,
without variation or acceleration hereunder, but subject to Section 5.6, and
(ii) in the case of Incentive Stock Options, the term shall not be more than ten
(10) years from the date the Incentive Stock Option is granted, or five (5)
years from such date if the Incentive Stock Option is granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code). Except as limited by requirements of Section 422 of the Code and
regulations and rulings thereunder applicable to Incentive Stock Options, the
Committee may extend the term of any outstanding Option in connection with any
Termination of Employment or Termination of Consultancy of the Optionee, or
amend any other term or condition of such Option relating to such a termination.

4.4 OPTION VESTING

(a) The period during which the right to exercise an Option in whole or in
part vests in the Optionee shall be set by the Committee and the Committee may
determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; PROVIDED, HOWEVER, that, unless the
Committee otherwise provides in the terms of the Option or otherwise, no Option
shall be exercisable by any Optionee who is then subject to Section 16 of the
Exchange Act within the period ending six months and one day after the date the
Option is granted; and PROVIDED, FURTHER, that Options granted to Directors
shall become exercisable in cumulative annual installments of 20% on each of the
first, second, third, fourth and fifth anniversaries of the date of Option
grant, without variation or acceleration hereunder except as provided in Section
7.3(b). At any time after grant of an Option, the Committee may, in its sole and
absolute discretion and subject to whatever terms and conditions it selects,
accelerate the period during which an Option (except an Option granted to a
Director) vests.

(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
following the grant of the Option.

(c) To the extent that the aggregate Fair Market Value of stock with respect
to which "incentive stock options" (within the meaning of Section 422 of the
Code, but without regard to Section 422(d) of the Code) are exercisable for the
first time by an Optionee during any calendar year (under the Plan and all other
incentive stock option plans of the Company and any parent or subsidiary
corporation (within the meaning of Section 422 of the Code) of the Company)
exceeds $100,000, such Options shall be treated as Non-Qualified Options to the
extent required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.

4.5 CONSIDERATION. In consideration of the granting of an Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in the
employ of (or to consult for or to serve as a Director of, as applicable) the
Company or any Subsidiary for a period of at least six months (or such shorter
period as may be fixed in the Stock Option Agreement or by action of the
Committee following grant of the Option) after the Option is granted (or, in the
case of a Director, until the next annual meeting of stockholders of the
Company). Nothing in this Plan or in any Stock Option Agreement hereunder shall
confer upon any Optionee any right to continue in the employ of, or as a
consultant for, the Company or any Subsidiary, or

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as a director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.

ARTICLE V

EXERCISE OF OPTIONS

5.1 PARTIAL EXERCISE. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to fractional
shares and the Committee (or the Board, in the case of Options granted to
Directors) may require that, by the terms of the Option, a partial exercise be
with respect to a minimum number of shares.

5.2 MANNER OF EXERCISE. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his office:

(a) A written notice complying with the applicable rules established by the
Committee (or the Board, in the case of Options granted to Directors) stating
that the Option, or a portion thereof, is exercised. The notice shall be signed
by the Optionee or other person then entitled to exercise the Option or such
portion of the Option;

(b) Such representations and documents as the Committee (or the Board, in
the case of Options granted to Directors), in its absolute discretion, deems
necessary or advisable to effect compliance with all applicable provisions of
the Securities Act of 1933, as amended, and any other federal or state
securities laws or regulations. The Committee or Board may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;

(c) In the event that the Option shall be exercised pursuant to Section 7.1
by any person or persons other than the Optionee, appropriate proof of the right
of such person or persons to exercise the Option; and

(d) Full cash payment to the Secretary of the Company for the shares with
respect to which the Option, or portion thereof, is exercised. However, the
Committee (or the Board, in the case of Options granted to Directors), may in
its discretion (i) allow a delay in payment up to thirty (30) days from the date
the Option, or portion thereof, is exercised; (ii) allow payment, in whole or in
part, through the delivery of shares of Common Stock owned by the Optionee, duly
endorsed for transfer to the Company with a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or exercised
portion thereof; (iii) allow payment, in whole or in part, through the surrender
of shares of Common Stock then issuable upon exercise of the Option having a
Fair Market Value on the date of Option exercise equal to the aggregate exercise
price of the Option or exercised portion thereof; (iv) allow payment, in whole
or in part, through the delivery of property of any kind which constitutes good
and valuable consideration; (v) allow payment, in whole or in part, through the
delivery of a full recourse promissory note bearing interest (at no less than
such rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee or the Board; (vi)
allow payment, in whole or in part, through the delivery of a notice that the
Optionee has placed a market sell order with a broker with respect to shares of
Common Stock then issuable upon exercise of the Option, and that the broker has
been directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the Option exercise price; or (vii) allow payment
through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory note,
the Committee (or the Board, in the case of Options granted to Directors) may
also prescribe the form of such note and the security to be given for such note.
The Option may not be exercised, however, by delivery of a promissory note or by
a loan from the Company when or where such loan or other extension of credit is
prohibited by law.

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5.3 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall not be
required to issue or deliver any certificate or certificates of stock purchased
upon the exercise of any Option or portion thereof prior to fulfillment of all
of the following conditions, any of which may be waived by the Company, in its
discretion:

(a) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed;

(b) The completion of any registration or other qualification of such shares
under any state or federal law, or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body
which the Committee or Board shall, in its absolute discretion, deem necessary
or advisable;

(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee (or Board, in the case of
Options granted to Directors) shall, in its absolute, discretion determine to be
necessary or advisable;

(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee (or Board, in the case of Options granted to
Directors) may establish from time to time for reasons of administrative
convenience; and

(e) Subject to Section 5.2(d), the receipt by the Company of full payment
for such shares, including payment of any applicable withholding tax.

5.4 RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor have
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.

5.5 OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee (or Board, in the
case of Options granted to Directors), in its absolute discretion, may impose
such restrictions on the ownership and transferability of the shares purchasable
upon the exercise of an Option as it deems appropriate. Any such restriction
shall be set forth in the respective Stock Option Agreement and may be referred
to on the certificates evidencing such shares. The Committee may require the
Employee to give the Company prompt notice of any disposition of shares of
Common Stock acquired by exercise of an Incentive Stock Option within (i) two
years from the date of granting (including the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code) such Option to
such Employee or (ii) one year after the transfer of such shares to such
Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.

5.6 LIMITATIONS ON EXERCISE OF OPTIONS GRANTED TO DIRECTORS. No Option
granted to a Director may be exercised to any extent by anyone after the first
to occur of the following events:

(a) the expiration of twelve (12) months from the date of the Optionee's
death;

(b) the expiration of twelve (12) months from the date of the Optionee's
Termination of Directorship by reason of his permanent and total disability
(within the meaning of Section 22(e)(3) of the Code);

(c) the expiration of three (3) months from the date of the Optionee's
Termination of Directorship for any reason other than such Optionee's death or
his permanent and total disability, unless the Optionee dies within said
three-month period; or

(d) The expiration of ten years from the date the Option was granted.

III-8
<PAGE>
ARTICLE VI

ADMINISTRATION

6.1 COMPENSATION COMMITTEE. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under this Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.

6.2 DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the Committee
to conduct the general administration of this Plan in accordance with its
provisions. The Committee shall have the power to interpret this Plan and the
agreements pursuant to which Options are granted or awarded, and to adopt such
rules for the administration, interpretation, and application of this Plan as
are consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Directors. Any such grant or award under this Plan
need not be the same with respect to each Optionee. Any such interpretations and
rules with respect to Incentive Stock Options shall be consistent with the
provisions of Section 422 of the Code. In its absolute discretion, the Board may
at any time and from time to time exercise any and all rights and duties of the
Committee under this Plan except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code, or any regulations or rules issued thereunder,
are required to be determined in the sole discretion of the Committee.

6.3 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Committee.

6.4 COMPENSATION; PROFESSIONAL ASSISTANCE, GOOD FAITH ACTIONS. Members of
the Committee shall receive such compensation, if any, for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Optionees, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or Options, and all
members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.

ARTICLE VII

MISCELLANEOUS PROVISIONS

7.1 NOT TRANSFERABLE. Options under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such options have been
exercised, or the shares underlying such options have been issued, and all
restrictions applicable to such shares have lapsed. No Option or interest or
right therein shall be liable for the debts, contracts or engagements of the
Optionee or his successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted

III-9
<PAGE>
disposition thereof shall be null and void and of no effect, except to the
extent that such disposition is permitted by the preceding sentence.

During the lifetime of the Optionee, only he may exercise an Option (or any
portion thereof) granted to him under the Plan, unless it has been disposed of
pursuant to a QDRO. After the death of the Optionee, any exercisable portion of
an Option may, prior to the time when such portion becomes unexercisable under
the Plan or the applicable Stock Option Agreement or other agreement, be
exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's will or under the then applicable laws of descent
and distribution.

7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. Except as otherwise
provided in this Section 7.2, this Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Board or the Committee. However, without approval of the Company's
stockholders given within twelve months before or after the action by the Board
or the Committee, no action of the Board or the Committee may, except as
provided in Section 7.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan, and no action of
the Board or the Committee may be taken that would otherwise require stockholder
approval as a matter of applicable law, regulation or rule. Furthermore, no
modification of the Award Limit shall be effective prior to the approval of the
Company's stockholders. No amendment, suspension or termination of this Plan
shall, without the consent of the holder of Options, alter or impair any rights
or obligations under any Options theretofore granted or awarded, unless the
award itself otherwise expressly so provides. No Options may be granted or
awarded during any period of suspension or after termination of this Plan, and
in no event may any Incentive Stock Option be granted under this Plan after the
first to occur of the following events:

(a) The expiration of ten years from the date the Plan is adopted by the
Board; or

(b) The expiration of ten years from the date the Plan is approved by the
Company's stockholders under Section 7.4.

7.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR
LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.

(a) Subject to Section 7.3(d), in the event that the Committee (or the
Board, in the case of Options granted to Directors) determines that any dividend
or other distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company
(including, but not limited to, a Corporate Transaction), or exchange of Common
Stock or other securities of the Company, issuance of warrants or other rights
to purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Committee's sole discretion (or in the
case of Options granted to Directors, the Board's sole discretion), affects the
Common Stock such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Option, then the Committee (or the Board, in the case of Options granted
to Directors) shall, in such manner as it may deem equitable, adjust any or all
of

(i) the number and kind of shares of Common Stock (or other securities
or property) with respect to which Options may be granted under the Plan,
(including, but not limited to, adjustments of the limitations in Section
2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),

(ii) the number and kind of shares of Common Stock (or other securities
or property) subject to outstanding Options, and

III-10
<PAGE>
(iii) the grant or exercise price with respect to any Option.

(b) Subject to Section 7.3(d), in the event of any Corporate Transaction or
other transaction or event described in Section 7.3(a) or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of the
Company, or the financial statements of the Company or any affiliate, or of
changes in applicable laws, regulations, or accounting principles, the Committee
(or the Board, in the case of Options granted to Directors) in its discretion is
hereby authorized to take any one or more of the following actions whenever the
Committee (or the Board, in the case of Options granted to Directors) determines
that such action is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to any option under this Plan, to facilitate such transactions
or events or to give effect to such changes in laws, regulations or principles:

(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Directors) may provide, either by the terms of the
agreement or by action taken prior to the occurrence of such transaction or
event and either automatically or upon the optionee's request, for either
the purchase of any such Option for an amount of cash equal to the positive
difference, if any, between the amount that could have been obtained upon
the exercise of such Option and the exercise price of such Option, or
realization of the optionee's rights had such Option been currently
exercisable or payable or fully vested or the replacement of such Option
with other rights or property selected by the Committee (or the Board, in
the case of Options granted to Directors) in its sole discretion;

(ii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Directors) may provide, either by the terms of such
Option or by action taken prior to the occurrence of such transaction or
event, that for a specified period of time prior to such transaction or
event, such Option shall be exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in (i) Section 4.4 or (ii) the
provisions of such Option;

(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Directors) may provide, either by the terms of such
Option or by action taken prior to the occurrence of such transaction or
event, that upon such event, such Option be assumed by the successor or
survivor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar Options covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; and

(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Directors) may make adjustments in the number and type
of shares of Common Stock (or other securities or property) subject to
outstanding Options and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included in, outstanding Options
and Options which may be granted in the future.

(c) Subject to Section 7.3(d) and 7.8, the Committee (or the Board, in the
case of Options granted to Directors) may, in its discretion, include such
further provisions and limitations in any Option as it may deem equitable and in
the best interests of the Company.

(d) With respect to Options which are granted to Section 162(m) Participants
and are intended to qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section 7.3 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such option to fail to so qualify under Section
162(m)(4)(C), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent such
adjustment or action would result in short-swing profits liability under Section
16 or violate the exemptive conditions of

III-11
<PAGE>
Rule 16b-3 unless the Committee (or the Board, in the case of Options granted to
Directors) determines that the option is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to any option shall
always be rounded to the next whole number.

7.4 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted for the
approval of the Company's stockholders within twelve months after the date of
the Board's initial adoption of this Plan. Options may be granted prior to such
stockholder approval, provided that such Options shall not be exercisable prior
to the time when this Plan is approved by the stockholders, and provided further
that if such approval has not been obtained at the end of said twelve-month
period, all Options previously granted under this Plan shall thereupon be
canceled and become null and void.

7.5 TAX WITHHOLDING. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting, exercise or payment of any Option. The Committee (or the
Board, in the case of Options granted to Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee to elect to have
the Company withhold shares of Common Stock otherwise issuable under such Option
(or allow the return of shares of Common Stock) having a Fair Market Value equal
to the sums required to be withheld.

7.6 LOANS. The Committee may, in its discretion, extend one or more loans
to key Employees in connection with the exercise or receipt of an Option granted
under this Plan. The terms and conditions of any such loan shall be set by the
Committee.

7.7 FORFEITURE PROVISIONS. Pursuant to its general authority to determine
the terms and conditions applicable to awards under the Plan, the Committee (or
the Board, in the case of Options granted to Directors) shall have the right (to
the extent consistent with the applicable exemptive conditions of Rule 16b-3) to
provide, in the terms of Options made under the Plan, or to require the
recipient to agree by separate written instrument, that (i) any proceeds, gains
or other economic benefit actually or constructively received by the recipient
upon any receipt or exercise of an Option, or upon the receipt or resale of any
Common Stock underlying such Option, must be paid to the Company, and (ii) the
Option shall terminate and any unexercised portion of such Option (whether or
not vested) shall be forfeited, if (a) a Termination of Employment, Termination
of Consultancy or Termination of Directorship occurs prior to a specified date,
or within a specified time period following receipt or exercise of the Option,
or (b) the recipient at any time, or during a specified time period, engages in
any activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee (or
the Board, as applicable).

7.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND PERFORMANCE-BASED
COMPENSATION. Notwithstanding any other provision of this Plan, this Plan, and
any Option granted to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3) that are requirements for the application of such
exemptive rule. To the extent permitted by applicable law, the Plan and Options
granted hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule. Furthermore, notwithstanding any other provision
of this Plan, any Option which is granted to a Section 162(m) Participant and is
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.

7.9 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or

III-12
<PAGE>
compensation for Employees, Directors or Consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.

7.10 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of Options
under this Plan and the issuance and delivery of shares of Common Stock and the
payment of money under this Plan or under Options granted hereunder are subject
to compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Options granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.

7.11 TITLES. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Plan.

7.12 GOVERNING LAW. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.

III-13
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this Amendment No. 1 to Form 10 to be
signed on its behalf by the undersigned, thereunto duly authorized.

EXCEL LEGACY CORPORATION

Dated: February 10, 1998 By /s/ GARY B. SABIN
-----------------------------------------
Gary B. Sabin
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER

<PAGE>

EXHIBIT 4.1

<S> <C>
[SEAL] EXCEL LEGACY CORPORATION [SEAL]

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFICATE IS TRANSFERABLE IN SEE REVERSE FOR CERTAIN DEFINITIONS
THE CITY OF BOSTON, MA OR NEW YORK, NY CUSIP 300665 10 6

This Certifies that

is the record holder of

FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF

==================================EXCEL LEGACY CORPORATION===================================

transferable on the books of the Corporation by the holder hereof in person or by duly
authorized Attorney upon surrender of this certificate properly endorsed. This certificate
is not valid until countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly
authorized officers.

Dated

/s/ RICHARD B. MUIR /s/ GARY B. SABIN

SECRETARY PRESIDENT

</TABLE>

COUNTERSIGNED AND REGISTERED:
BankBoston, N.A.
TRANSFER AGENT AND REGISTRAR

By /s/ [ILLEGIBLE]

AUTHORIZED SIGNATURE

[SEAL]

<PAGE>

The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Such requests shall be made to the Corporation's Secretary at the
principal office of the Corporation.

KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED
THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE
ISSUANCE OF A REPLACEMENT CERTIFICATE.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>
<S> <C> <C> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT-- ................. Custodian .................
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors
as joint tenants with right
JT TEN -- of survivorship and not as
tenants in common Act..........................................
(State)

UNIF TRF MIN ACT-- ................. Custodian (Until age .....)
(Cust)
................. Under Union Transfers
(Minor)
to Minors Act...............................
(State)
</TABLE>

Additional abbreviations may also be used though not in the above list.

- --------------------------------------------------------------------------------

TRANSFER FEE: $2.50 FOR EACH NEW CERTIFICATE ISSUED

<TABLE>
<S> <C> <C>
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------------------------
- - -
- - -
- - -
- - -
- ----------------------------------------------------
</TABLE>

FOR VALUE RECEIVED, _______________________ hereby sell, assign and transfer
unto ___________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated ____________________________

X
---------------------------------------

X
---------------------------------------
NOTICE: The signature(s) to this assignment must
correspond with the name as written
upon the face of the Certificate in
every particular, without alteration
or enlargement or any change whatever.

Signature(s) Guaranteed:

By
--------------------------------------------------------------------------
THIS SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION,
BANKS, STOCKBROKERS, SAVING AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT
TO S.E.C. RULE 17Ad-16

<PAGE>

EXHIBIT 4.2

CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF

SERIES A LIQUIDATING PREFERENCE CONVERTIBLE
PREFERRED STOCK DUE 2005

EXCEL LEGACY CORPORATION

--------------------------

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

--------------------------

Excel Legacy Corporation, a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated ________, 1998, adopted the
following resolution which resolution remains in full force and effect on the
date hereof:

RESOLVED, that there is hereby established a series of authorized
preferred stock having a par value of $.01 per share, which series shall be
designated as "Series A Liquidating Preference Convertible Preferred Stock due
2005" (the "Series A Preferred Stock"), shall consist of __________ shares and
shall have the following voting powers, preferences and relative, participating,
optional and other special rights, and qualifications, limitations and
restrictions thereof as follows:

1. CERTAIN DEFINITIONS.

Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).

BUSINESS DAY. The term "Business Day" shall mean a day other than a
Saturday or Sunday or any federal holiday.

COMMON STOCK. The term "Common Stock" shall mean the common stock,
par value $.01 per share, of the Corporation.

CONVERSION RATE. The term "Conversion Rate" shall initially mean
$5.00 and thereafter shall be subject to adjustment from time to time pursuant
to the terms of paragraph 4 below.

<PAGE>

DIVIDEND PAYMENT DATE. The term "Dividend Payment Date" shall have
the meaning set forth in subparagraph 2(a) below.

DIVIDEND PERIOD. The term "Dividend Period" shall mean the period
from, and including, the Initial Issue Date to, but not including, the first
Dividend Payment Date and thereafter, each quarterly period from, and including,
the Dividend Payment Date to, but not including the next Dividend Payment Date.

INITIAL ISSUE DATE. The term "Initial Issue Date" shall mean the date
that shares of Series A Preferred Stock are first issued by the Corporation.

JUNIOR STOCK. The term "Junior Stock" shall mean, for purposes of
paragraph 2 below, Common Stock and any class or series of stock of the
Corporation authorized after the Initial Issue Date which is not entitled to
receive any dividends in any Dividend Period unless all dividends required to
have been paid or declared and set apart for payment on the Series A Preferred
Stock shall have been so paid or declared and set apart for payment, and for
purposes of paragraph 3 below, shall mean Common Stock and any class or series
of stock of the Corporation authorized after the Initial Issue Date which is not
entitled to receive any assets upon liquidation, dissolution or winding up of
the affairs of the Corporation until the Series A Preferred Stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.

LIQUIDATION PREFERENCE. With respect to each share of Series A
Preferred Stock, the term "Liquidation Preference" shall mean $5.00 per share,
plus a premium in an amount equal to a seven percent (7%) annual total return on
a share of Series A Preferred Stock from the Initial Issue Date until the date
such Liquidation Preference is paid by the Corporation.

PARITY STOCK. The term "Parity Stock" shall mean, for purposes of
paragraph 2 below, any class or series of stock of the Corporation authorized
after the Initial Issue Date which is entitled to receive payment of dividends
on a parity with the Series A Preferred Stock, and for purposes of paragraph 3
below, shall mean any class or series of stock of the Corporation authorized
after the Initial Issue Date which is entitled to receive assets upon
liquidation, dissolution or winding up of the affairs of the Corporation on a
parity with the Series A Preferred Stock.

QUOTED PRICE. The term "Quoted Price" with respect to either the
Common Stock or Series A Preferred Stock, shall mean the average of the closing
bid and ask prices of the applicable security as reported by the National
Association of Securities Dealers, Inc. Automatic Quotations System, National
Market System, or, if the applicable security is listed or admitted for trading
on a securities exchange, the average of the closing bid and ask prices of the
applicable security on the principal exchange on which the applicable security
is listed or admitted for trading (which shall be for consolidated trading if
applicable to such exchange), or if neither so reported or listed or admitted
for trading, the average of the closing bid and ask prices of the applicable
security in the over-the-counter market. In the event that the Quoted Price
cannot be determined as aforesaid, the Board of Directors of the Corporation
shall determine the Quoted Price on the basis of such quotations as it in good
faith considers appropriate.

RECORD DATE. The term "Record Date" shall mean the date designated by
the Board of Directors of the Corporation at the time a dividend is declared;
provided, however, that such Record Date shall not be more than thirty (30) days
nor less than ten (10) days prior to the respective Dividend Payment Date or
such other date designated by the Board of Directors for the payment of
dividends.

2
<PAGE>

REDEMPTION DATE. The term "Redemption Date" shall have the meaning
set forth in subparagraph 5(a) below.

SENIOR STOCK. The term "Senior Stock" shall mean, for purposes of
paragraph 2 below, any class or series of stock of the Corporation authorized
after the Initial Issue Date ranking senior to the Series A Preferred Stock in
respect of the right to receive dividends, and for purposes of paragraph 3
below, shall mean any class or series of stock of the Corporation authorized
after the Initial Issue Date ranking senior to the Series A Preferred Stock in
respect of the right to participate in any distribution upon liquidation,
dissolution or winding up of the affairs of the Corporation.

STATED VALUE. The term "Stated Value" shall have the meaning set
forth in subparagraph 4(a) below.

TRADING DAY. The term "Trading Day" with respect to either the Common
Stock or Series A Preferred Stock, shall mean any day on which any market in
which the applicable security is then traded and in which a Quoted Price may be
ascertained is open for business.

2. DIVIDENDS.

(a) Holders of shares of Series A Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the payment of dividends, cumulative quarterly cash dividends
equal to the per share Common Stock Dividend Amount, payable in arrears on
January 15, April 15, July 15 and October 15 of each year, commencing on the
first such day after the Issuance Date (each a "Dividend Payment Date"). The
"Common Stock Dividend Amount" applicable as of any Dividend Payment Date shall
mean the amount which is the product of (i) the dollar amount of the dividend
paid per share of Common Stock on the dividend payment date with respect to the
shares of Common Stock (other than a distribution payable solely in shares of
Common Stock) which occurs on such Dividend Payment Date or, if no such dividend
payment date occurs on such Dividend Payment Date, the dividend payment date
with respect to the shares of Common Stock next preceding such Dividend Payment
Date, and (ii) the number of shares of Common Stock into which each share of
Series A Preferred Stock is entitled to be converted, at the Conversion Price
then in effect and otherwise as set forth in this Certificate of Designation, as
of the Record Date established for such Dividend Payment Date (determined, for
purposes of this computation, to the fourth decimal place). The dividend
payable to a holder of a share of Series A Preferred Stock on the first Dividend
Payment Date after the share is issued will be the accrued dividend calculated
from the day the share is issued to such Dividend Payment Date. If any Dividend
Payment Date is not a Business Day, the dividend due on that Dividend Payment
Date will be paid on the Business Day immediately succeeding that Dividend
Payment Date. Each Dividend Payment Date will be on a date which is the date
fixed for payment of dividends with respect to the shares of Common Stock or is
not more than five Business Days after the date fixed for payment of dividends
with respect to the shares of Common Stock.

(b) Each dividend will be payable to holders of record of the Series
A Preferred Stock on the Record Date selected by the Board of Directors with
respect to the relevant Dividend Payment Date. Dividends shall be paid to the
holders of record of the Series A Preferred Stock as their names shall appear on
the share register of the Corporation on the Record Date for such dividend.
Dividends payable in any Dividend Period which is less than a full Dividend
Period in length will be computed on the basis of a ninety (90) day quarterly
period and actual days elapsed in such Dividend Period. Dividends on account of
arrears for any past Dividend Periods may be declared and paid at any time to
holders of record on the Record Date therefor.

3
<PAGE>

(c) So long as any shares of Series A Preferred Stock shall be
outstanding, the Corporation shall not declare, pay or set apart for payment on
any Junior Stock any dividends whatsoever, whether in cash, property or
otherwise (other than dividends payable in shares of the class or series upon
which such dividends are declared or paid, or payable in shares of Common Stock
with respect to Junior Stock other than Common Stock, together with cash in lieu
of fractional shares), nor shall the Corporation make any distribution on any
Junior Stock, nor shall any Junior Stock be purchased, redeemed or otherwise
acquired by the Corporation or any of its subsidiaries of which it owns not less
than a majority of the outstanding voting power, nor shall any monies be paid or
made available for a sinking fund for the purchase or redemption of any Junior
Stock, unless all dividends to which the holders of Series A Preferred Stock
shall have been entitled for all previous Dividend Periods shall have been paid
or declared and a sum of money sufficient for the payment thereof has been set
apart.

(d) In the event that full dividends are not paid or made available
to the holders of all outstanding shares of Series A Preferred Stock and of any
Parity Stock and funds available for payment of dividends shall be insufficient
to permit payment in full to holders of all such stock of the full preferential
amounts to which they are then entitled, then the entire amount available for
payment of dividends shall be distributed ratably among all such holders of
Series A Preferred Stock and of any Parity Stock in proportion to the full
amount to which they would otherwise be respectively entitled.

(e) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Series A Preferred Stock shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation if such declaration or payment shall be restricted or prohibited by
law.

(f) Any dividend paid with regard to shares of Series A Preferred
Stock will be paid equally with regard to each outstanding share of Series A
Preferred Stock, except to the extent that shares of Series A Preferred Stock
are outstanding for differing amounts of time during the relevant dividend
period.

3. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.

(a) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation, subject to
the prior preferences and other rights of any Senior Stock as to liquidation
preferences, but before any payment or distribution shall be made to the holders
of Junior Stock, the holders of Series A Preferred Stock shall be entitled to be
paid out of the assets of the Corporation in cash or property at its fair market
value as determined by the Board of Directors of the Corporation the Liquidation
Preference per share plus an amount equal to all dividends accrued and unpaid
thereon to the date of such liquidation or dissolution or such other winding up.
Except as provided in this paragraph, holders of Series A Preferred Stock shall
not be entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation.

(b) If, upon any such liquidation, dissolution or other winding up of
the affairs of the Corporation the assets of the Corporation shall be
insufficient to permit the payment in full of the Liquidation Preference per
share plus an amount equal to all dividends accrued and unpaid on the Series A
Preferred Stock and the full liquidating payments on all Parity Stock, then the
assets of the Corporation remaining after the distributions to holders of any
Senior Stock of the full amounts to which they may be entitled shall be ratably
distributed among the holders of Series A Preferred Stock and of any Parity
Stock in proportion to the full amounts to which they would otherwise be
respectively entitled if all amounts thereon were paid in full.

4
<PAGE>

(c) A sale, conveyance or disposition of all or substantially all of
the assets of the Corporation shall be deemed to be a liquidation, dissolution
or winding up within the meaning of this paragraph 3.

4. CONVERSION RIGHTS.

(a) (i) A holder of shares of Series A Preferred Stock may convert
such shares into Common Stock at any time in whole or from time to time in part
before such shares are redeemed by giving notice to such effect (a "Notice of
Election to Convert") to the Corporation. For the purposes of conversion, each
share of Series A Preferred Stock shall be valued at $5.00 per share (the
"Stated Value"), which shall be divided by the Conversion Rate in effect on the
Conversion Date to determine the number of shares issuable upon conversion.
Immediately following such conversion, the rights of the holders of converted
Series A Preferred Stock shall cease and the persons entitled to receive the
Common Stock upon the conversion of Series A Preferred Stock shall be treated
for all purposes as having become the owners of such Common Stock.

(ii) To convert Series A Preferred Stock, a holder must (A)
surrender the certificate or certificates evidencing the shares of Series A
Preferred Stock to be converted, duly endorsed in a form satisfactory to the
Corporation, at the office of the Corporation or transfer agent for the Series A
Preferred Stock, (B) provide a Notice of Election to Convert to the Corporation
at such office and include therein the number of shares such holder wishes to
convert, (C) state in writing the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued, and (D) pay
any transfer or similar tax if required. In the event that a holder fails to
notify the Corporation of the number of shares of Series A Preferred Stock which
such holder wishes to convert in the Notice of Election to Convert delivered to
the Corporation, such holder shall be deemed to have elected to convert all
shares represented by the certificate or certificates surrendered for
conversion.

(b) If, at any time after the Initial Issue Date, the Quoted Price of
the Common Stock on each of at least thirty (30) consecutive Trading Days
immediately prior to the Notice of Mandatory Conversion shall be equal to or
greater than the price per share set forth below (each such price being
effective for a period of 90 days commencing on the first day of each quarter
(i.e., each 90-day period immediately following the Initial Issue Date)
indicated below), the Corporation shall have the right to convert all of the
outstanding shares of Series A Preferred Stock into a number of shares of Common
Stock (calculated to the nearest 1/100th of a share) equal to the product of (i)
the number of shares of Series A Preferred Stock to be converted multiplied by
(ii) the Stated Value divided by the Conversion Rate then in effect, such that
each share of Series A Preferred Stock is valued as set forth in clause (a)(i)
in consideration for Common Stock issued in conversion priced at the Conversion
Rate calculated in accordance with this paragraph 4. For purposes hereof, the
30-day period referred to in the previous sentence need not fall entirely within
the same quarter, but instead may overlap quarters so long as the Quoted Price
of the Common Stock on each Trading Day within the 30-day period is equal to or
greater than the price per share set forth below with respect to each such
quarter.

Price
-----
Year 1
------
1st Qtr. . . . . . . . . . $5.0000
2nd Qtr. . . . . . . . . . 5.0875
3rd Qtr. . . . . . . . . . 5.1750
4th Qtr. . . . . . . . . . 5.2625

5
<PAGE>

Year 2
------
1st Qtr. . . . . . . . . . 5.3500
2nd Qtr. . . . . . . . . . 5.4375
3rd Qtr. . . . . . . . . . 5.5250
4th Qtr. . . . . . . . . . 5.6125

Year 3
------
1st Qtr. . . . . . . . . . 5.7000
2nd Qtr. . . . . . . . . . 5.7875
3rd Qtr. . . . . . . . . . 5.8750
4th Qtr. . . . . . . . . . 5.9625

Year 4
------
1st Qtr. . . . . . . . . . 6.0500
2nd Qtr. . . . . . . . . . 6.1375
3rd Qtr. . . . . . . . . . 6.2250
4th Qtr. . . . . . . . . . 6.3125

Year 5
------
1st Qtr. . . . . . . . . . 6.4000
2nd Qtr. . . . . . . . . . 6.4875
3rd Qtr. . . . . . . . . . 6.5750
4th Qtr. . . . . . . . . . 6.6625

Year 6
------
1st Qtr. . . . . . . . . . 6.7500
2nd Qtr. . . . . . . . . . 6.8375
3rd Qtr. . . . . . . . . . 6.9250
4th Qtr. . . . . . . . . . 7.0125

Year 7
------
1st Qtr. . . . . . . . . . 7.1000
2nd Qtr. . . . . . . . . . 7.1875
3rd Qtr. . . . . . . . . . 7.2750
4th Qtr. . . . . . . . . . 7.3625

In order to elect to effect the mandatory conversion of Series A Preferred
Stock, the Corporation shall issue a notice as to the date of the intended
conversion and number of shares of Series A Preferred Stock which are to be
converted into shares of Common Stock (the "Notice of Mandatory Conversion") to
all holders of outstanding shares of Series A Preferred Stock on a date (the
"Mandatory Conversion Notice Date") at least ninety (90) but not more than one
hundred twenty (120) days prior to the conversion date specified in the Notice
of Mandatory Conversion (the "Mandatory Conversion Date"), which Notice of
Mandatory Conversion specifies a record date (the "Mandatory Conversion Record
Date") selected by the Board of Directors which is not less than twenty (20) nor
more than forty-five (45) days before the Mandatory Conversion Date. If the
Corporation gives a Notice of Mandatory Conversion, then, provided that the
computation set forth in the Notice of Mandatory Conversion is not clearly
erroneous, the number of the outstanding shares of Series A Preferred Stock
which are the subject of such Notice of Mandatory Conversion will be
automatically converted into shares of Common Stock at the close of business on
the Mandatory Conversion Date regardless of whether the holders of such shares
of Series A Preferred Stock

6
<PAGE>

actually surrender the certificates representing their shares of Series A
Preferred Stock for conversion. At the close of business on the Mandatory
Conversion Date, (i) the certificates representing the shares of Series A
Preferred Stock will cease to represent anything other than the shares of Common
Stock into which the shares of Series A Preferred Stock were automatically
converted and (ii) the Corporation shall, at its option (the exercise of which
will be described in the Notice of Mandatory Conversion), either (A) deliver
certificates representing the shares of Common Stock to which the holders of the
Series A Preferred Stock are entitled without requiring the surrender of the
certificates which formerly represented shares of Series A Preferred Stock, or
(B) deliver certificates representing the shares of Common Stock to which the
holders of Series A Preferred Stock are entitled when the holder surrenders the
certificates representing Series A Preferred Stock issued before the Mandatory
Conversion Date and complies with the other requirements of subparagraph
4(a)(ii) (excluding the completion of the Notice of Election to Convert).

(c) The effective time of the conversion under subparagraph 4(a)
shall be immediately prior to the close of business on the day when all the
conditions in subparagraph 4(a)(ii) have been satisfied. The effective time of
the conversion under subparagraph 4(b) shall be the close of business on the
Mandatory Conversion Date. Except as otherwise permitted in clause (ii)(B) of
the last sentence of subparagraph 4(b), as soon as practical after the effective
time for conversion of shares of Series A Preferred Stock, the Corporation shall
deliver through the transfer agent a certificate for the number of full shares
of Common Stock issuable upon the conversion, a check for any fractional share
and a new certificate representing the unconverted portion, if any, of the
shares of Series A Preferred Stock represented by the certificate or
certificates surrendered for conversion. Except in the case of a conversion
pursuant to subparagraph 4(b) above, no payment or adjustment will be made for
accrued and unpaid dividends on converted shares of Series A Preferred Stock or
dividends on any Common Stock issued. However, dividends will be paid on any
Dividend Payment Date with respect to Series A Preferred Stock surrendered for
conversion after a record date for the payment of a dividend to the registered
holder of Series A Preferred Stock on such record date. If a holder of Series A
Preferred Stock converts more than one share at a time the number of full shares
of Common Stock issuable upon conversion shall be based on the total value of
all shares of Series A Preferred Stock converted. If the last day on which
Series A Preferred Stock may be converted is not a Business Day in a place where
the Corporation or the transfer agent is located, Series A Preferred Stock may
be surrendered for conversion on the next succeeding day that is a Business Day.
Each conversion will be deemed to have been effected at the effective time
provided above, and the person in whose name a certificate for shares of Common
Stock is to be issued upon a conversion will be deemed to have become the holder
of record of the shares of Common Stock represented by that certificate at such
effective time.

(d) The Corporation will not issue a fractional share of Common Stock
upon conversion of Series A Preferred Stock. Instead the Corporation will
deliver its check for the current market value of the fractional share. The
current market value of a fraction of a share is determined as follows:
Multiply the current market price of a full share by the fraction. Round the
result to the nearest cent. The current market price of a share of Common Stock
is the Quoted Price of the Common Stock on the last Trading Day prior to the
date of conversion.

(e) If a holder converts shares of Series A Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Common Stock upon the conversion. However, the
holder shall pay any such tax which is due because the shares are issued in name
other than the holder's name.

7
<PAGE>

(f) The Corporation has reserved and shall continue to reserve out of
its authorized but unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of the Series A Preferred
Stock in full. All shares of Common Stock which may be issued upon conversion
of Series A Preferred Stock shall be fully paid and nonassessable. The
Corporation will use its best efforts to comply with all securities laws
regulating the offer and delivery of shares of Common Stock upon conversion of
Series A Preferred Stock and will use its best efforts to list such shares on
each national securities exchange on which the Common Stock is listed.

(g) If the Corporation:

(i) pays a dividend or makes a distribution on any shares of
its capital stock in shares of its Common Stock;

(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;

(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or

(iv) issues by reclassification of its Common Stock any shares
of its capital stock;

then the Conversion Rate in effect immediately prior to such action shall be
adjusted so that the holder of Series A Preferred Stock thereafter converted may
receive the number of shares of capital stock of the Corporation which he would
have owned immediately following such action if he had converted Series A
Preferred Stock immediately prior to such action. The adjustment shall become
effective immediately after the record date in the case of dividend or
distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If, after an adjustment referred
to in clauses (i) through (iv) above, a holder of Series A Preferred Stock upon
conversion of it may receive shares of two or more classes of capital stock of
the Corporation, the Corporation shall determine the allocation of the adjusted
Conversion Rate between the classes of capital stock. After such allocation,
the Conversion Rate of each class of capital stock shall thereafter be subject
to adjustment on terms comparable to those applicable to Common Stock in this
subparagraph (g).

(h) If the Corporation distributes any rights or warrants to all
holders of its Common Stock entitling them for a period expiring within sixty
(60) days after the record date mentioned below to purchase shares of Common
Stock at a price per

8
<PAGE>

share less than the current market price per share on that record date, the
Conversion Rate shall be adjusted in accordance with the following formula:

N X P
-----
O + M
-------
C'= C x O + N

where:

C' = the adjusted Conversion Rate.

C = the then current Conversion Rate.

O = the number of shares of Common Stock outstanding on the
record date.

N = the number of additional shares of Common Stock offered.

P = the offering price per share of the additional shares of
Common Stock.

M = the current market price per share of Common Stock on the
record date.

The adjustment shall be made successively whenever any such rights or warrants
are issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights or warrants. If at
the end of the period during which such warrants or rights are exercisable, not
all warrants or rights shall have been exercised, the Conversion Rate shall be
immediately readjusted to what it would have been if "N" in the above formula
had been the number of shares actually issued.

(i) If the Corporation distributes to all holders of shares of its
Common Stock (i) any shares of any class of capital stock of the Corporation
other than its Common Stock, (ii) any evidence of indebtedness of the
Corporation or any subsidiary of the Corporation, (iii) any other assets of the
Corporation, or (iv) any rights, options or warrants to acquire any of the
foregoing (other than rights, options or warrants referred to in subparagraph
4(h) above), which shares, evidences of indebtedness, other assets or rights,
options or warrants have an aggregate fair market value on the date of such
distribution in excess of the permitted dividend amount (as defined below), the
Conversion Rate shall be adjusted in accordance with the following formula:

M - F
-------
C'= C x M

where:

C' = the adjusted Conversion Rate.

C = the then current Conversion Rate.

M = the current market price per share of Common Stock on the
record date mentioned below.

9
<PAGE>

F = the fair market value on the record date of the capital
stock, indebtedness, rights, options or warrants applicable
to one share of Common Stock. The Board of Directors of the
Corporation shall determine the fair market value.

The adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. The
permitted dividend amount on any date shall be an amount equal to or less than
(x) five percent (5%) of the product of the current market price of the Common
Stock on the date of declaration by the Board of Directors of the Corporation of
such dividend or distribution times the number of shares of Common Stock
outstanding on such date, minus (y) the aggregate of the value of all dividends
or distributions (other than dividends or distributions referred to in
subparagraphs 4(g) and 4(h) above) paid to holders of Common Stock during the
twelve-month period ending on such date. Notwithstanding the foregoing, the
permitted dividend amount shall be zero with respect to any dividends or
distributions not paid out of consolidated current earnings as shown on the
books of the Corporation.

(j) If the Corporation issues shares of Common Stock for a
consideration per share less than the current market price per share on the date
the Corporation fixes the offering price of such additional shares, the
Conversion Rate shall be adjusted in accordance with the following formula:

O + P
---
M
-------
C'= C x A

where:

C' = the adjusted Conversion Rate.

C = the then current Conversion Rate.

O = the number of shares outstanding immediately prior to the
issuance of such additional shares.

P = the aggregate consideration received for the issuance of
such additional shares.

M = the current market price per share on the date of issuance
of such additional shares.

A = the number of shares outstanding immediately after the
issuance of such additional shares.

The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. This
subparagraph 4(j) does not apply to (i) any transaction or issuance described in
subparagraph 4(h) or 4(i) above or subparagraph 4(k) below, (ii) the conversion
of Series A Preferred Stock, or the conversion, exchange or exercise of other
securities convertible into or exchangeable or exercisable for Common Stock,
(iii) Common Stock issued to the Corporation's employees under bona fide
employee benefit plans adopted by the Board of Directors of the Corporation and
approved by the holders of Common Stock when required by law, if such Common

10
<PAGE>

Stock would otherwise by covered by this subparagraph 4(j), (iv) Common Stock
issued to acquire, or in the acquisition of, all or any portion of a business as
a going concern, in an arm's-length transaction between the Corporation and an
unaffiliated third party, whether such acquisition shall be effected by purchase
of assets, exchange of securities, merger, consolidation or otherwise, or (v)
Common Stock issued in a bona fide public offering pursuant to a firm commitment
underwriting.

(k) If the Corporation issues any options, warrants or other
securities convertible into or exchangeable or exercisable for Common Stock
(other than Series A Preferred Stock or securities issued in transactions
described in subparagraph 4(h) or 4(i) above) and for a consideration per share
of Common Stock initially deliverable upon conversion, exchange or exercise of
such securities less than the current market price per share on the date of
issuance of such securities, the Conversion Rate shall be adjusted in accordance
with the following formula:

O + P
---
M
------
C'= C x O + D

where:

C' = the adjusted Conversion Rate.

C = the then current Conversion Rate.

O = the number of shares outstanding immediately prior to the
issuance of such securities.

P = the aggregate consideration received for the issuance of
such securities.

M = the current market price per share on the date of issuance
of such securities.

D = the maximum number of shares deliverable upon conversion or
in exchange for or upon exercise of such securities at the
initial conversion, exchange or exercise rate.

The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. If all of
the Common Stock deliverable upon conversion, exchange or exercise of such
securities has not been issued when such securities are no longer outstanding,
then the Conversion Rate shall promptly be readjusted to the Conversion Rate
which would then be in effect had the adjustment upon the issuance of such
securities been made on the basis of the actual number of shares of Common Stock
issued upon conversion, exchange or exercise of such securities. This
subparagraph 4(k) does not apply to (i) the issuance of any such securities to
acquire, or in the acquisition of, all or any portion of a business as a going
concern, in an arm's-length transaction between the Corporation and an
unaffiliated third party, whether such acquisition shall be effected by purchase
of assets, exchange of securities, merger, consolidation or otherwise, (ii) the
issuance of any such securities in a bona fide public offering pursuant to a
firm commitment underwriting, or (iii) the issuance of any such securities to
the Corporation's employees under bona fide employee benefit plans adopted by
the Board of Directors of the Corporation and approved by the holders of Common
Stock when required by law, if such securities would otherwise by covered by
this subparagraph 4(k).

11
<PAGE>

(l) In subparagraphs 4(h), 4(i), 4(j) and 4(k) above, the current
market price per share of Common Stock on any date is the average of the Quoted
Prices for thirty (30) consecutive Trading Days commencing forty-five (45)
Trading Days before the date in question.

(m) For purposes of any computation respecting consideration received
pursuant to subparagraphs 4(j) and 4(k) above, the following shall apply:

(i) in case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Corporation for any underwriting of the issue or
otherwise in connection therewith;

(ii) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined by the Board of Directors of the Corporation (irrespective of
the accounting treatment thereof); and

(iii) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares, the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Corporation for the issuance of such options,
warrants or other securities plus the additional minimum consideration, if
any, to be received by the Corporation upon the conversion or exchange or
exercise thereof (the consideration in each case to be determined in the
same manner as provided in clauses (i) and (ii) of this subparagraph 4(m)).

(n) No adjustment in the Conversion Rate need be made unless the
adjustment would require an increase or decrease of at least one percent (1%) in
the Conversion Rate. Any adjustments that are not made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this paragraph 4 shall be made to the nearest cent or to the nearest 1/100th of
a share, as the case may be.

(o) No adjustment in the Conversion Rate need be made under this
paragraph 4 for (i) rights to purchase Common Stock pursuant to a Corporation
plan for reinvestment of dividends or interest, or (ii) any change in the par
value or no par value of the Common Stock, and in no event shall any adjustment
made under this paragraph 4 reduce the Conversion Rate below the par value of
the Common Stock. If an adjustment is made to the Conversion Rate upon the
establishment of a record date for a distribution subject to subparagraphs 4(h)
or 4(i) above and if such distribution is subsequently cancelled, the Conversion
Rate then in effect shall be readjusted, effective as of the date when the Board
of Directors of the Corporation determines to cancel such distribution, to the
Conversion Rate which would have been in effect if such record date had not been
fixed. No adjustment in the Conversion Rate need be made under subparagraphs
4(h) and 4(i) above if the Corporation issues or distributes to each holder of
Series A Preferred Stock the shares of Common Stock, evidences of indebtedness,
assets, rights, options or warrants referred to in those subparagraphs which
each holder would have been entitled to receive had Series A Preferred Stock
been converted into Common Stock prior to the happening of such event or the
record date with respect thereto.

(p) Whenever the Conversion Rate is adjusted, the Corporation shall
promptly mail to holders of Series A Preferred Stock, first class, postage
prepaid, a notice of the adjustment. The Corporation shall file with the
transfer agent, if any, for Series A Preferred Stock a certificate from the

12
<PAGE>

Corporation's independent public accountants briefly stating the facts requiring
the adjustment and the manner of computing it. Subject to subparagraph 4(u)
below, the certificate shall be conclusive evidence that the adjustment is
correct.

(q) The Corporation from time to time may reduce the Conversion Rate
by any amount for any period of time if the period is at least twenty (20)
Business Days and if the reduction is irrevocable during the period, but in no
event may the Conversion Rate be less than the par value of a share of Common
Stock. Whenever the Conversion Rate is reduced, the Corporation shall mail to
holders of Series A Preferred Stock a notice of the reduction. The Corporation
shall mail, first class, postage prepaid, the notice at least 15 days before the
date the reduced conversion price takes effect. The notice shall state the
reduced conversion price and the period it will be in effect. A reduction of
the Conversion Rate does not change or adjust the Conversion Rate otherwise in
effect for purposes of subparagraphs 4(g), 4(h), 4(i), 4(j) and 4(k) above.

(r) If:

(i) the Corporation takes any action which would require an
adjustment in the Conversion Rate pursuant to subparagraph 4(h) or 4(i)
above, or clause (iv) of subparagraph 4(g) above;

(ii) the Corporation consolidates or merges with, or transfers
all or substantially all of its assets to, another corporation, and
stockholders of the Corporation must approve the transaction; or

(iii) there is a dissolution or liquidation of the Corporation;

a holder of Series A Preferred Stock may want to convert such stock into shares
of Common Stock prior to the record date for or the effective date of the
transaction so that he may receive the rights, warrants, securities or assets
which a holder of shares of Common Stock on that date may receive. Therefore,
the Corporation shall mail to such holders, first class, postage prepaid, a
notice stating the proposed record or effective date, as the case may be. The
Corporation shall mail the notice at least ten (10) days before such date.
Failure to mail the notice or any defect in it shall not affect the validity of
any transaction referred to in clause (i), (ii) or (iii) of this subparagraph
4(h). If a conversion of any shares of Series A Preferred Stock is to be made
in connection with any transaction referred to in clause (i), (ii) or (iii) of
this subparagraph 4(q), such conversion may at the election of the holder be
conditioned upon the consummation of such transaction, in which case such
conversion shall not be deemed to be effective until immediately prior to the
consummation of such transaction.

(s) If the Corporation is party to a consolidation, merger, transfer
or lease which reclassifies or changes its Common Stock, upon consummation of
such transaction Series A Preferred Stock shall automatically become convertible
into the kind and amount of securities, cash or other assets which the holder of
Series A Preferred Stock would have owned immediately after the consolidation,
merger, transfer or lease if such holder had converted Series A Preferred Stock
immediately before the effective date of the transaction, appropriate adjustment
(as determined by the Board of Directors of the Corporation) shall be made in
the application of the provisions herein set forth with respect to the rights
and interests thereafter of the holders of Series A Preferred Stock, to the end
that the provisions set forth herein (including provisions with respect to
changes in and other adjustment of the Conversion Rate) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other

13
<PAGE>

securities or property thereafter deliverable upon the conversion of Series A
Preferred Stock. If this subparagraph 4(s) applies, subparagraph 4(g) does not
apply.

(t) In any case in which this paragraph 4 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event (i) the issuance to the holder of any shares of Series A Preferred Stock
converted after such record date and before the occurrence of such event of the
additional shares of Common Stock issuable upon such conversion over and above
the shares issuable on the basis of the Conversion Rate in effect immediately
prior to adjustment and (ii) a check for any remaining fractional shares of
Common Stock as provided in subparagraph 4(d) above.

(u) Except as provided in the immediately following sentence, any
determination that the Corporation or its Board of Directors must make pursuant
to this paragraph 4 shall be conclusive. Whenever the Corporation or its Board
of Directors shall be required to make a determination under this paragraph 4,
such determination shall be made in good faith and may be challenged in good
faith by a majority of the holders of Series A Preferred Stock, and any dispute
shall be resolved, at the Corporation's expense, by an investment banking firm
of recognized national standing selected by the Corporation and acceptable to
such holders of Series A Preferred Stock.

(v) All shares of Series A Preferred Stock converted pursuant to this
paragraph 4 shall be retired and shall be restored to the status of authorized
and unissued shares of preferred stock, without designation as to series and may
thereafter be reissued as shares of any series of preferred stock.

5. REDEMPTION BY THE CORPORATION.

(a) On ________, 2005 (the "Redemption Date"), the Corporation shall
be required to redeem (subject to the legal availability of funds therefor) all
outstanding shares of Series A Preferred Stock at a price in cash equal to the
Stated Value, plus accumulated and unpaid dividends, if any, to the date of
redemption (such amount, the "Redemption Price"). The Series A Preferred Stock
may not be redeemed at the option of the Corporation on or prior to the
Redemption Date. The Corporation shall take all actions required or permitted
under the General Corporation Law of the State of Delaware to permit such
redemption.

(b) Notice of any redemption shall be sent by or on behalf of the
Corporation not more than sixty (60) days nor less than thirty (30) days prior
to the Redemption Date, by first class mail, postage prepaid, to all holders of
record of the Series A Preferred Stock at their respective last addresses as
they shall appear on the books of the Corporation; provided, however, that no
failure to give such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Series A Preferred Stock except as to the holder to whom the Corporation has
failed to give notice or except as to the holder to whom notice was defective.
In addition to any information required by law or by the applicable rules of any
exchange upon which Series A Preferred Stock may be listed or admitted to
trading, such notice shall state: (i) the Redemption Date; (ii) the Redemption
Price; (iii) the place or places where certificates for such shares are to be
surrendered for payment of the Redemption Price; (iv) that dividends on the
shares to be redeemed will cease to accrue on the Redemption Date; (v) the
Conversion Rate; (vi) that Series A Preferred Stock called for redemption may be
converted at any time before the close of business on the Redemption Date; and
(vii) that holders of Series A Preferred Stock must satisfy the requirements of
subparagraph 4(a) above if such holders desire to convert such shares.

14
<PAGE>

(c) If notice has been mailed in accordance with subparagraph 5(b)
above and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds in trust for the pro rata
benefit of the holders of the shares so called for redemption, so as to be, and
to continue to be available therefor, then, from and after the Redemption Date,
dividends on the shares of the Series A Preferred Stock so called for redemption
shall cease to accrue, and said shares shall no longer be deemed to be
outstanding and shall not have the status of shares of Series A Preferred Stock,
and all rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the Redemption Price) shall cease.
Upon surrender, in accordance with said notice, of the certificates for any
shares so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the Redemption Price.

(d) Any funds deposited with a bank or trust company for the purpose
of redeeming Series A Preferred Stock shall be irrevocable except that:

(i) the Corporation shall be entitled to receive from such
bank or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed shall
have no claim to such interest or other earnings; and

(ii) any balance of monies so deposited by the Corporation and
unclaimed by the holders of the Series A Preferred Stock entitled thereto
at the expiration of two (2) years from the applicable Redemption Date
shall be repaid, together with any interest or other earnings earned
thereon, to the Corporation, and after any such repayment, the holders of
the shares entitled to the funds so repaid to the Corporation shall look
only to the Corporation for payment without interest or other earnings.

(e) No Series A Preferred Stock may be redeemed except with funds
legally available for the payment of the Redemption Price.

(f) All shares of Series A Preferred Stock redeemed pursuant to this
paragraph 5 shall be retired and shall be restored to the status of authorized
and unissued shares of preferred stock, without designation as to series and may
thereafter be reissued as shares of any series of preferred stock other than
shares of Series A Preferred Stock.

6. VOTING RIGHTS.

(a) The holders of shares of Series A Preferred Stock will have the
right to vote on all matters on which the holders of shares of the Common Stock
are entitled to vote, or give written consent in lieu of a vote, on an "as
converted" basis with holders of shares of the Common Stock, as though part of
the same class as holders of Common Stock. Each person in whose name shares of
Series A Preferred Stock shall be registered on the record date for determining
the holders of the Series A Preferred Stock entitled to vote at any meeting of
stockholders (or adjournment thereof) or to consent to corporate action in
writing without a meeting shall be entitled to, at such meeting or with respect
to such action, one vote for each share of Common Stock of the Corporation into
which each share of Series A Preferred Stock registered in the name of such
person on such record date could be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share) on such record date. The holders of shares of Series A Preferred Stock
shall receive all notices of meetings of the holders of shares of Common Stock,
and all other notices and correspondence to the

15
<PAGE>

holders of shares of Common Stock provided by the Corporation, and shall be
entitled to take such actions, and shall have such rights, as are set forth in
this Certificate of Designation or are otherwise available to the holders of
shares of Common Stock in the Certificate of Incorporation and in the Bylaws of
the Corporation as are in effect on the date hereof, in each case with the same
effect as would be taken by holders of Series A Preferred Stock if deemed to be
holders of such number of shares of Common Stock as determined aforesaid. The
foregoing shall apply whether or not such holder actually converts such
securities.

(b) In addition to any vote or consent of stockholders required by
law or the Certificate of Incorporation, the consent of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the shares of Series A Preferred
Stock at the time outstanding, given in person or by proxy, either in writing
without a meeting or by vote at any meeting called for the purpose, shall be
necessary for effecting or validating:

(i) Any amendment, alteration or repeal of any of the
provisions of the Certificate of Incorporation, or of the by-laws of the
Corporation, which affects adversely the voting powers, preferences and
relative, participating, optional and other special rights of the holders
of shares of Series A Preferred Stock; provided, however, that the
amendment of the provisions of the Certificate of Incorporation so as to
authorize or create, or to increase the authorized amount of, or to issue
any class or any security convertible into any shares ranking on a parity
with or junior to the Series A Preferred Stock in the distribution of
assets on any liquidation, dissolution, or winding up of the Corporation or
in the payment of dividends, shall not be deemed to affect adversely the
voting powers, preferences and relative, participating, optional and other
special rights of the holders of shares of Series A Preferred Stock; or

(ii) Any authorization or creation of, or increase in the
authorized amount of, or issuance of, any shares of any class or any
security convertible into shares of any class ranking senior to shares of
Series A Preferred Stock in the distribution of assets on any liquidation,
dissolution, or winding up of the Corporation or in the payment of
dividends or otherwise.

(c) In addition to any vote or consent of stockholders required by
law or the Certificate of Incorporation, the consent of each holder, if any, of
at least $70,000,000 of Stated Value of the Series A Preferred Stock at the time
outstanding, given in person or by proxy, either in writing without a meeting or
by vote at any meeting called for the purpose, shall be necessary for effecting
any issuance of shares of Common Stock or any security convertible into shares
of Common Stock, but only if such issuance would result in the number of issued
and outstanding shares of Common Stock at the time outstanding (on a fully
diluted basis, after giving effect to such issuance) exceeding 100 million (as
appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the Initial Issue
Date).

7. EXCLUSION OF OTHER RIGHTS.

Except as may otherwise be required by law, the shares of Series A
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) and in the Certificate of Incorporation.

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<PAGE>

8. HEADINGS OF SUBDIVISIONS.

The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.

9. SEVERABILITY OF PROVISIONS.

If any voting powers, preferences and relative, participating,
optional and other special rights of the Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as such resolution may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect, and no voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof unless so expressed herein.

17
<PAGE>

IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by Gary B. Sabin, its President and Chief Executive Officer, and
attested by Richard B. Muir, its Secretary, this _____ day of __________, 1998.

EXCEL LEGACY CORPORATION

By:
------------------------------------
Gary B. Sabin, President and
Chief Executive Officer

ATTEST:

By:
---------------------------
Richard B. Muir, Secretary

<PAGE>

EXHIBIT 10.5

TAX SHARING AGREEMENT

TAX SHARING AGREEMENT, dated as of __________, 1998, between Excel
Realty Trust, Inc., a Maryland corporation ("Excel"), and Excel Legacy
Corporation, a Delaware corporation and wholly-owned subsidiary of Excel
("Legacy").

WHEREAS, Excel is the parent corporation of an affiliated group of
corporations that join in filing consolidated federal Income Tax Returns and
certain consolidated, combined or unitary state Income Tax Returns;

WHEREAS, Legacy is a wholly-owned subsidiary of Excel and a member
of the Excel Group;

WHEREAS, pursuant to the Distribution Agreement (as hereinafter
defined), Excel presently intends to distribute all the common stock of
Legacy to its stockholders (the "Distribution"); and

WHEREAS, Excel and Legacy desire on behalf of themselves, their
subsidiaries and their successors to set forth their respective rights and
obligations with respect to Taxes (as hereinafter defined).

NOW THEREFORE, in consideration of their mutual promises, the
parties hereby agree as follows:

1. DEFINITIONS.

When used herein the following terms shall have the following
meanings:

"CLOSING DATE" -- the date the Distribution is consummated pursuant
to the terms of the Distribution Agreement.

"CODE" -- the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the taxable year in question.

"DISTRIBUTION AGREEMENT" -- the Distribution Agreement dated
___________, 1998 between Excel and Legacy.

"EXCEL ASSETS" -- the retail properties and other assets (together
with any related liabilities) retained by Excel pursuant to the Distribution
Agreement.

"EXCEL GROUP" -- for any taxable year or period, Excel and each
corporation filing a consolidated federal Income Tax Return with Excel as the
parent corporation.

<PAGE>

"INCOME TAX(ES)" -- with respect to any corporation or group of
corporations, any and all Taxes to the extent based upon or measured by net
income (regardless of whether denominated as an "income tax," a "franchise
tax" or otherwise), imposed by any Taxing Authority, together with any
related interest, penalties or other additions thereto.

"IRS" -- the U.S. Internal Revenue Service.

"LEGACY ASSETS" -- the retail properties and other assets (together
with any related liabilities) distributed to Legacy pursuant to the
Distribution Agreement.

"LEGACY GROUP" -- Legacy and each corporation filing a consolidated
federal Income Tax Return with Legacy as the parent corporation.

"OTHER TAXES" -- Taxes other than Income Taxes.

"OVERDUE RATE" -- a rate of interest per annum that fluctuates with
the federal short-term rate established from time to time pursuant to Code
Section 6621(b).

"TAX(ES)" -- any net income, gross income, gross receipts, sales,
use, excise, franchise, transfer, payroll, premium, property or windfall
profits tax, alternative or add-on minimum tax, or other tax, fee or
assessment, together with any interest and any penalty, addition to tax or
other additional amount imposed by any Taxing Authority, whether any such tax
is imposed directly or through withholding.

"TAXING AUTHORITY" -- the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.

"TAX RETURN(S)" -- all returns, reports, estimates, information
statements, declarations and other filings relating to, or required to be
filed by any taxpayer in connection with, its liability for, or its payment
or receipt of any refund of, any Tax.

2. PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES

A. Excel shall prepare and timely file, or cause to be
prepared and timely filed, with the appropriate Taxing Authorities (i) all
federal and state Income and Other Tax Returns of the Excel Group and any
member or members thereof for all taxable years and periods ending on or
before the Closing Date; and (ii) all federal and state Income and Other Tax
Returns of Excel for all taxable years and periods beginning after the
Closing Date. Excel shall pay, or cause to be paid, all Taxes due with
respect to Tax Returns described in this subsection (a). Excel shall be
entitled to all Tax refunds received or receivable with respect to any and
all Income and Other Taxes attributable to the Excel Assets for all taxable
years and periods.

B. Legacy shall prepare and timely file, or cause to be
prepared and timely filed, with the appropriate Taxing Authorities, all
federal and state Income and Other Tax

<PAGE>

Returns of the Legacy Group and any member or members thereof for taxable
years and periods beginning after the Closing Date. Legacy shall pay, or
cause to be paid, all Taxes due with respect to Tax Returns described in this
subsection (b). Legacy shall be entitled to all Tax refunds received or
receivable with respect to any and all Income and Other Taxes attributable to
the Legacy Assets for all taxable years and periods.

3. PAYMENTS.

A. METHOD. Unless the parties otherwise agree, all payments
made by a party pursuant to this Agreement shall be made by wire transfer to
a bank account designated from time to time by the other party. The paying
party shall also provide a notice of payment to the recipient.

B. INTEREST. If any payment is not timely paid, interest
shall accrue on the unpaid amount at the Overdue Rate. A payment will be
deemed to be timely paid only if actually received by the payee within five
(5) days of the receipt of notice from the other party that such payment is
due.

C. CHARACTERIZATION. Any payment (other than interest
thereon) made hereunder shall be treated by all parties for all purposes as a
nontaxable intercompany settlement of liabilities existing immediately before
the Distribution or, to the extent appropriate, as a non-taxable dividend
distribution or capital contribution.

4. CONTESTS AND AUDITS; INDEMNIFICATION.

A. NOTICE. Upon the receipt by Excel or Legacy, as the case
may be, of notice of any pending or threatened Tax audit or assessment which
may affect the liability for Taxes that are subject to indemnification
hereunder, Excel or Legacy, as the case may be, shall promptly notify the
other in writing of the receipt of such notice.

B. CONTROL AND SETTLEMENT. From and after the Closing Date,
Excel shall have full control over, and the right to represent the interests
of, Excel and all other corporations involved in or affected by any Tax audit
or administrative, judicial or other proceeding relating, in whole or in
part, to Taxes that are subject to indemnification by Excel hereunder. Excel
shall have the right to employ counsel of its choice at its expense, and
shall have the ultimate control of the contest and any settlement or other
resolution thereof. Any liability for Taxes established pursuant to such
proceeding shall be allocated and paid in accordance with Section 2 of this
Agreement.

C. AMENDMENT OF TAX RETURNS. Excel shall have sole control
over the preparation and filing of any and all amendments to Tax Returns
described in Section 2(a).

D. INDEMNIFICATION. Excel shall indemnify and hold harmless
Legacy and the Legacy Group against any and all Income and Other Taxes
specifically attributable to the

<PAGE>

Excel Assets for all taxable years and periods. Legacy shall indemnify and
hold harmless Excel against any and all Income and Other Taxes specifically
attributable to the Legacy Assets for all taxable years and periods.

5. COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.

A. COOPERATION. Upon reasonable request, Excel and Legacy
shall promptly provide (and shall cause their respective affiliates to
provide) the requesting party with such cooperation and assistance,
documents, and other information, without charge, as may be necessary or
reasonably helpful in connection with (i) the preparation and filing of any
original or amended Tax Return, (ii) the conduct of any audit, appeal,
protest or other examination or any judicial or administrative proceeding
involving to any extent Taxes or Tax Returns within the scope of this
Agreement, or (iii) the verification by a party of an amount payable
hereunder to, or receivable hereunder from, another party. Such cooperation
and assistance shall include, without limitation: (a) the provision on demand
of books, records, Tax Returns, documentation or other information relating
to any relevant Tax Return; (b) the execution of any document that may be
necessary or reasonably helpful in connection with the filing of any Tax
Return, or in connection with any audit, appeal, protest, proceeding, suit or
action of the type generally referred to in the preceding sentence,
including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations; (c) the prompt and timely
filing of appropriate claims for refund; and (d) the use of reasonable best
efforts to obtain any documentation from a governmental authority or a third
party that may be necessary or helpful in connection with the foregoing.
Each party shall make its employees and facilities available on a mutually
convenient basis to facilitate such cooperation.

B. RETENTION. Excel and Legacy shall retain or cause to be
retained all Tax Returns, and all books, records, schedules, workpapers, and
other documents relating thereto, which Tax Returns and other materials are
within the scope of this Agreement, until the expiration of the later of (i)
all applicable statutes of limitations (including any waivers or extensions
thereof), and (ii) any retention period required by law or pursuant to any
record retention agreement. The parties hereto shall notify each other in
writing of any waivers, extensions or expirations of applicable statutes of
limitations, and shall provide at least thirty (30) days prior written notice
of any intended destruction of the documents referred to in the preceding
sentence. A party giving such a notification shall not dispose of any of the
foregoing materials without first allowing the other party a reasonable
opportunity to copy them at such other party's expense.

C. CONFIDENTIALITY. Except as required by law or with the
prior written consent of the other party, all Tax Returns, documents,
schedules, work papers and similar items and all information contained
therein, which Tax Returns and other materials are within the scope of this
Agreement, shall be kept confidential by the parties hereto and their
representatives, shall not be disclosed to any other person or entity and
shall be used only for the purposes provided herein.

<PAGE>

6. MISCELLANEOUS.

A. EFFECTIVENESS. This Agreement shall be effective from
and after the Closing Date and shall survive until the expiration of all
applicable statutes of limitations with respect to taxable years and periods
ending on or before or including the Closing Date.

B. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter
hereof. This Agreement cancels and supersedes, as of the Closing Date, any
and all other agreements with respect to Taxes between Excel and Legacy.

C. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby. In the event that any such provision is
hereafter held to be invalid, void or unenforceable, the parties hereto agree
to use their reasonable best efforts to find and employ an alternate means to
achieve the same or substantially the same result as that contemplated by
such provision.

D. INDULGENCES, ETC. Neither the failure nor any delay on
the part of any party hereto to exercise any right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right preclude any other or further exercise of the same or any other right,
nor shall any waiver of any right with respect to any occurrence be construed
as a waiver of such right with respect to any other occurrence.

E. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
without regard to the conflict of law principles thereof, except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a party to or subject of this Agreement, and as to those
matters the law of the jurisdiction under which the respective entity derives
its powers shall govern.

F. NOTICES. All notices, requests, demands, statements,
bills and other communications under this Agreement shall be delivered in
accordance with Section 9.04 of the Distribution Agreement.

G. MODIFICATION OR AMENDMENT. This Agreement may be amended
at any time by written agreement executed and delivered by duly authorized
officers of Legacy and Excel.

H. SUCCESSORS AND ASSIGNS. Except by operation of law or in
connection with the sale of all or substantially all the assets of a party
hereto, a party's rights and obligations under this Agreement may not be
assigned without the prior written consent of the other party. All of the
provisions of this Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and permitted assigns.

<PAGE>

I. THIRD-PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties hereto and shall not be deemed to confer upon
third parties any remedy, claim, liability, reimbursement, claim of action or
other right in excess of those existing without this Agreement.

J. OTHER. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original
instrument, and all of such counterparts shall together constitute one and
the same instrument. The section numbers and captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.

K. PREDECESSORS AND SUCCESSORS. To the extent necessary to
give effect to the purposes of this Agreement, any reference to any
corporation shall also include any predecessor or successor thereto, by
operation of law or otherwise.

L. TAX ELECTIONS. Nothing in this Agreement is intended to
change or otherwise affect any previous tax election made by or on behalf of
the Excel Group, and Excel shall have sole discretion to make or change any
and all elections affecting the Excel Group or any member or members thereof
for all taxable years and periods ending on or before the Closing Date.

M. COSTS AND EXPENSES. Unless otherwise specifically
provided herein, each party agrees to pay its own costs and expenses
resulting from the fulfillment of its respective obligations hereunder.

N. DISPUTES. Any dispute between the parties hereunder
shall be resolved in accordance with Section 9.13 of the Distribution
Agreement.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

EXCEL REALTY TRUST, INC.,
A MARYLAND CORPORATION.

By: ____________________________________
Name: __________________________________
Title: _________________________________

EXCEL LEGACY CORPORATION,
A DELAWARE CORPORATION

By: ____________________________________
Name: __________________________________
Title: _________________________________

<PAGE>

EXHIBIT 10.6

TRANSITIONAL SERVICES AGREEMENT

This Transitional Services Agreement (this "Agreement") is made as of
this _____ day of __________, 1998, between Excel Realty Trust, Inc., a
Maryland corporation ("Excel"), and Excel Legacy Corporation, a Delaware
corporation ("Legacy").

RECITALS

WHEREAS, pursuant to a Distribution Agreement dated as of __________,
1998, (the "Distribution Agreement") between Excel, Legacy and ERT
Development Corporation, a Delaware corporation ("EDV"), Excel and EDV will
(i) transfer certain real properties (the "Properties"), notes receivable
(the "Notes"), and all other assets and liabilities of Excel and EDV related
thereto (collectively, the "Legacy Business") to Legacy; (ii) a distribution
by Legacy of all of the outstanding shares of common stock, par value $.0001
per share, of Legacy (the "Legacy Common Stock") to Excel; and (iii) a
special dividend by Excel to the stockholders of record of Excel's common
stock, consisting of the distribution on a one-for-one basis, of all of the
outstanding shares of Legacy Common Stock (the "Distribution"); and

WHEREAS, a condition of the closing of the transactions
contemplated by the Distribution Agreement is that Excel and Legacy enter
into, among other things, a transitional services agreement pursuant to which
Excel shall provide certain services to Legacy and Legacy shall provide
certain services to Excel.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter set forth, and intending to be legally bound
hereby, the parties agree as follows:

1. SERVICES. Excel and Legacy hereby agree, subject to Section 6 below,
to cause their respective employees and to use their respective assets to
provide certain services to the other, including without limitation, cash
management services, certain accounting services, litigation management, real
estate sevices and any other similar services that Excel or Legacy may
request. Nothing contained herein shall be deemed to restrict either party to
this Agreement from procuring any of the services to be provided hereunder
from outside vendors or from developing an in-house capability to provide
such services internally.

2. CHARGES FOR SERVICES. The charge for each service to be provided
hereunder shall be equal to the cost (which shall include indirect costs as
well as direct out of pocket expenses) of providing such service. The cost
of providing a service shall be determined in good faith by the party to
provide such service (the "providing party"). Prior to providing a service,
the providing party shall give an estimate of the cost thereof to the other
party, so that the other party shall have the opportunity to decide whether
to accept such service before it is performed.

3. INVOICE AND PAYMENT. Each party shall invoice the other once each
month for the services performed during the prior month and each party shall
pay the other for such services not later than ten (10) days from the receipt
of invoice.

4. OUTSIDE SERVICES. In the event that the providing party is required
to retain outside consultant/contractor assistance to perform any of the
services hereunder, the providing party shall first

<PAGE>

obtain the consent of the other party to such retention and the other party
shall pay directly the fees of such consultant/contractor. The providing
party shall not be held responsible for the performance of such
consultant/contractor services and the other party assumes the risk thereof.

5. CONTRACTUAL RELATIONSHIP. The relationship between Excel and Legacy
under this Agreement shall be that of principal and agent in respect of the
services to be performed hereunder. In no event is the relationship of the
parties intended to be that of employer and employee and in no event is
either party to be deemed or purported to be the partner or joint venturer of
the other for any purpose whatsoever.

6. TERM. The term of this Agreement shall expire on December 15, 1998;
provided, however, that each party shall have the right, upon fourteen (14)
days advance notice to the other, to terminate all or part of the services it
performs hereunder. Upon the termination of all services, payment therefor
and payment of all consultants/contractors, this Agreement shall terminate.

7. LIMITATION OF LIABILITY. Neither party shall have any liability
whatsoever to the other party or to any third party for any loss, liability,
damage, cost or deficiency (collectively, "Losses"), or for any claim for
Losses, including, without limitation, Losses or claims for personal injury,
death or property damage, warranty, tort or products liability, resulting
from, caused by or arising out of a party's performance under this Agreement
except for claims arising out of the negligence or willful default or breach
of such party hereunder. In no event shall any party have liability to the
other party or to any third party for indirect, special or consequential
damages or loss of profits (except with respect to its willful default or
breach), or for punitive damages for any reason whatsoever.

8. NOTICES. All notices and other communications hereunder shall be in
writing and shall be delivered by hand or mailed by registered or certified
mail (return receipt requested) to the parties at the following addresses (or
at such other addresses for a party as shall be specified by like notice) and
shall be deemed given on the date on which such notice is received:

To Legacy:

Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: Richard B. Muir

To Excel:

Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: Gary B. Sabin

9. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
any party hereto without the prior written consent of the other party (other
than to an affiliate). Any purported assignment in violation of the
provisions hereof shall be void.

<PAGE>

10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California (regardless of the laws that might otherwise govern under
applicable California conflict of laws principles) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies.

11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

12. INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.

13. SEVERANCE. In the event that any provision of this Agreement is
declared illegal, invalid or unenforceable or contrary to law, it shall not
affect any other provision in the Agreement.

14. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to the transactions contemplated hereby.

15. DISPUTES. Any disputes arising under this Agreement shall be
resolved by binding arbitration in the manner contemplated by Section 9.13 of
the Distribution Agreement, including the attorneys' fees provision
referenced therein.

<PAGE>

IN WITNESS WHEREOF, each of Excel and Legacy has caused this Agreement
to be executed by its duly authorized officer as of the date first above
written.

EXCEL REALTY TRUST, INC.

By: ________________________________
Name: ________________________________
Title: ________________________________

EXCEL LEGACY CORPORATION

By: ________________________________
Name: ________________________________
Title: ________________________________

<PAGE>

EXHIBIT 10.7

INDEMNITY AGREEMENT

This Indemnity Agreement is made and entered into as of the ___ day of
_________, 19__ by and between EXCEL LEGACY CORPORATION, a Delaware
corporation (the "Company"), and _______________ ("Indemnitee").

WHEREAS, Indemnitee is currently serving as a director, officer,
employee and/or agent of the Company and/or, at the Company's request, as a
director, officer, employee, trustee and/or agent of another corporation,
partnership, joint venture, trust or other enterprise, and the Company wishes
Indemnitee to continue in such capacity(ies);

WHEREAS, the Amended and Restated Certificate of Incorporation (the
"Restated Certificate of Incorporation") and the Amended and Restated Bylaws
(the "Bylaws") of the Company each provide that the Company shall indemnify,
in the manner and to the fullest extent permitted by the Delaware General
Corporation Law (the "DGCL"), certain persons, including directors, officers,
employees or agents of the Company, against specified expenses and losses
arising out of certain threatened, pending or completed actions, suits or
proceedings;

WHEREAS, Indemnitee has indicated that he or she may not be willing to
continue to serve as a director, officer, employee and/or agent of the
Company and/or, at the Company's request, as a director, officer, employee,
trustee and/or agent of another corporation, partnership, joint venture,
trust or other enterprise in the absence of indemnification in addition to
that provided in the Restated Certificate of Incorporation and the Bylaws of
the Company;

WHEREAS, DGCL Section 145(f) expressly recognizes that the
indemnification provisions of the DGCL are not exclusive of any other rights
to which a person seeking indemnification may be entitled under the Restated
Certificate of Incorporation or Bylaws of the Company, or an agreement
providing for indemnification, or a resolution of stockholders or directors,
or otherwise;

WHEREAS, the Company, in order to induce Indemnitee to continue to serve
in such capacity, has agreed to provide Indemnitee with the benefits
contemplated by this Indemnity Agreement, and, as a result of the provision
of such benefits, Indemnitee has agreed to continue to serve in such
capacity; and

WHEREAS, the Restated Certificate of Incorporation and Bylaws each
expressly recognizes that the indemnification provisions of the Restated
Certificate of Incorporation and Bylaws shall not be deemed exclusive of, and
shall not affect, any other rights to which a person seeking indemnification
may be entitled under any agreement, and this Indemnity Agreement is being
entered into pursuant to the Restated Certificate of Incorporation and Bylaws
as permitted by the DGCL, and as authorized by the stockholders of the
Company.

NOW, THEREFORE, in consideration of the promises, conditions and
representations set forth herein, including Indemnitee's continued service as
a director, officer, employee and/or agent of the Company and/or, at the
Company's request, as a director, officer, employee, trustee and/or agent of
another corporation, partnership, joint venture, trust or other enterprise,
the Company and Indemnitee hereby agree as follows:

Section 1. DEFINITIONS. The following terms, as used herein, shall
have the following meanings:

(a) "Covered Claim" shall mean any threatened, pending or completed
claim, action, suit or proceeding against Indemnitee based upon or arising
out of any past, present or future act, omission, neglect or breach of
duty, including, without limitation, any actual or alleged error, omission,
misstatement or misleading statement, that Indemnitee may commit or suffer
while serving in his or her capacity as a director, officer, employee
and/or agent of the Company and/or, at the Company's request, as a
director, officer, employee, trustee and/or agent of another corporation,
partnership, joint venture, trust or other enterprise (including, without
limitation, employee benefit plans and administrative committees thereof),
provided that such claim:

<PAGE>

(i) is not solely based upon and does not arise solely out
of Indemnitee gaining in fact any personal profit or advantage to
which Indemnitee is not legally entitled;

(ii) is not for an accounting of profits made from the
purchase or sale by Indemnitee of securities of the Company within the
meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of any state law; and

(iii) is not based solely upon and does not arise solely out
of Indemnitee's knowingly fraudulent, deliberately dishonest or
willful misconduct.

(b) "Determination" shall mean a determination, based upon the facts
known at the time, made by:

(i) the Board of Directors of the Company, by the vote of
a majority of the directors who are not parties to the action, suit
or proceeding in question, at a meeting at which there is a quorum
consisting solely of such disinterested directors;

(ii) if such a quorum is not obtainable, or, even if
obtainable, if directed by a majority of such disinterested directors
at a meeting of the Board of Directors of the Company at which there
is a quorum consisting solely of such disinterested directors, by
independent legal counsel in a written opinion;

(iii) the stockholders of the Company; or

(iv) a court of competent jurisdiction in a final,
nonappealable adjudication.

(c) "Payment" shall mean any and all amounts that Indemnitee is or
becomes legally obligated to pay in connection with a Covered Claim,
including, without limitation, damages, judgments, amounts paid in
settlement, reasonable costs of investigation, reasonable fees of
attorneys, costs of investigative, judicial or administrative proceedings
or appeals, costs of attachment or similar bonds, fines, penalties, excise
taxes assessed with respect to employee benefit plans, and any expenses of
establishing a right to indemnification under this Indemnity Agreement.

Section 2. INDEMNIFICATION. The Company shall indemnify and hold harmless
Indemnitee against and from any and all Payments to the extent that:

(a) the Company shall not have advanced expenses to Indemnitee
pursuant to the provisions of Article EIGHTH of the Company's Restated
Certificate of Incorporation or otherwise and no determination shall have
been made pursuant to such Article or the DGCL that the Indemnitee is not
entitled to indemnification;

(b) Indemnitee shall not already have received payment on account of
such Payments pursuant to one or more valid and collectible insurance
policies; and

Notwithstanding anything contained in this Indemnity Agreement to the contrary,
except for proceedings to enforce rights to indemnification or advancement of
expenses pursuant to Section 4 hereof, the Company shall have no obligation to
indemnify Indemnitee in connection with a proceeding (or part thereof) initiated
by Indemnitee unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors of the Company. Further, the Company
shall have no obligation to indemnify Indemnitee under this Indemnity Agreement
for any amounts paid in a settlement of any action, suit or proceeding effected
without the Company's prior written consent, which consent shall not be
unreasonably withheld. The Company shall not settle any claim in any manner
that would impose any obligation on Indemnitee without Indemnitee's prior
written consent.

<PAGE>

Indemnitee shall not unreasonably withhold his consent to any proposed
settlement.

Section 3. INDEMNIFICATION PROCEDURE; ADVANCEMENTS OF COSTS AND EXPENSES.

(a) Promptly after receipt by Indemnitee of notice of the
commencement or threat of commencement of any action, suit or proceeding,
Indemnitee shall, if indemnification with respect thereto may be sought
from the Company under this Indemnity Agreement, notify the Company thereof
in writing in the manner set forth in Section 9 hereof.

(b) If at the time of receipt of such notice the Company has
directors' and officers' liability insurance in effect, the Company shall
give prompt notice of the commencement of such action, suit or proceeding
to the insurers in accordance with the procedures set forth in the
respective policies in favor of Indemnitee. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on
behalf of Indemnitee, all Payments payable as a result of such action, suit
or proceeding in accordance with the terms of such policies.

(c) All costs and expenses, including reasonable fees of attorneys,
incurred by Indemnitee in defending or investigating such action, suit or
proceeding shall be paid by the Company in advance of the final disposition
of such action, suit or proceeding; provided, however, that no such costs
or expenses shall be paid by the Company if, with respect to such action,
suit or proceeding, a Determination is made that:

(i) Indemnitee did not act in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company;

(ii) in the case of any criminal action or proceeding,
Indemnitee had reasonable cause to believe his or her conduct was
unlawful; or

(iii) Indemnitee intentionally breached his or her duty to
the Company or its stockholders.

Indemnitee hereby undertakes to and agrees that he or she will repay the
Company for any costs or expenses advanced by or on behalf of the Company
pursuant to this Section 3(c) if it shall ultimately be determined by a court
of competent jurisdiction in a final, nonappealable adjudication that
Indemnitee is not entitled to indemnification under this Indemnity Agreement.

(d) If the Company shall advance the costs and expenses of any such
action, suit or proceeding pursuant to Section 3(c) of this Indemnity
Agreement, it shall be entitled to assume the defense of such action, suit
or proceeding, if appropriate, with counsel reasonably satisfactory to
Indemnitee, upon delivery to Indemnitee of written notice of its election
so to do. After delivery of such notice, the Company shall not be liable
to Indemnitee under this Indemnity Agreement for any costs or expenses
subsequently incurred by Indemnitee in connection with such defense other
than reasonable costs and expenses of investigation; provided, however,
that:

(i) Indemnitee shall have the right to employ separate
counsel in any such action, suit or proceeding provided that the fees
and expenses of such counsel incurred after delivery of notice by the
Company of its assumption of such defense shall be at Indemnitee's own
expense; and

(ii) the fees and expenses of counsel employed by Indemnitee
shall be at the expense of the Company if (aa) the employment of
counsel by Indemnitee has previously been authorized by the Company,
(bb) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct
of any such defense (provided that the Company shall not be required
to pay for more than one counsel to represent

<PAGE>

two or more Indemnitees where such Indemnitees have reasonably
concluded that there is no conflict of interest among them in the
conduct of such defense), or (cc) the Company shall not, in fact,
have employed counsel to assume the defense of such action, suit or
proceeding.

(e) All payments on account of the Company's advancement obligations
under Section 3(c) of this Indemnity Agreement shall be made within twenty
(20) days of Indemnitee's written request therefor. All other payments on
account of the Company's obligations under this Indemnity Agreement shall
be made within sixty (60) days of Indemnitee's written request therefor,
unless a Determination is made that the claims giving rise to Indemnitee's
request are not payable under this Indemnity Agreement. Each request for
payment hereunder shall be accompanied by evidence reasonably satisfactory
to the Company of Indemnitee's incurrence of the costs and expenses for
which such payment is sought.

Section 4. ENFORCEMENT OF INDEMNIFICATION; BURDEN OF PROOF. If a claim
for indemnification or advancement of costs and expenses under this Indemnity
Agreement is not paid in full by or on behalf of the Company within the time
period specified in Section 3(e) of this Indemnity Agreement, Indemnitee may
at any time thereafter bring suit against the Company to recover the unpaid
amount of such claim. In any such action, the Company shall have the burden
of proving that indemnification is not required under this Indemnity
Agreement.

Section 5. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled
under any provision of this Indemnity Agreement to indemnification by the
Company for some portion of any Payments, but not, however, for the total
amount thereof, the Company shall nevertheless indemnify the Indemnitee for
the portion of any such Payments to which the Indemnitee is entitled.

Section 6. EMPLOYEE BENEFIT PLANS. The term "other enterprises," as
used in this Indemnity Agreement, shall include employee benefit plans and
any administrative committees thereof. All references in this Indemnity
Agreement to "serving . . . at the Company's request" shall include any
service by Indemnitee as a director, officer, employee, trustee and/or agent
of the Company which imposes duties on, or involves services by, Indemnitee
with respect to an employee benefit plan, its participants or beneficiaries.
If Indemnitee acts in good faith and in a manner he or she reasonably
believes to be in the interests of the participants and beneficiaries of any
employee benefit plan, then, for purposes of Section 3(c)(i) hereof,
Indemnitee shall be deemed to have acted in a manner he or she "reasonably
believed to be in or not opposed to the best interests of the Company."

Section 7. RIGHTS NOT EXCLUSIVE. The rights to indemnification and
advancement of costs and expenses provided hereunder shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under any
charter document, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.

Section 8. SUBROGATION. In the event of payment under this Indemnity
Agreement by or on behalf of the Company, the Company shall be subrogated to
the extent of such payment to all of the rights of recovery of Indemnitee,
who shall execute all papers that may be required and shall do all things
that may be necessary to secure such rights, including, without limitation,
the execution of such documents as may be necessary to enable the Company
effectively to bring suit to enforce such rights.

Section 9. NOTICE OF CLAIM. The Indemnitee, as a condition precedent
to his or her right to be indemnified under this Indemnity Agreement, shall
give to the Company notice in writing as soon as practicable of any claim
made against him or her for which indemnity will or could be sought under
this Indemnity Agreement. Notice to the Company shall be given at its
principal office and shall be directed to the Corporate Secretary (or such
other address as the Company shall designate in writing to the Indemnitee);
notice shall be deemed received if sent by prepaid mail properly addressed,
the date of such notice being the date postmarked. In addition, the
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within the Indemnitee's power.

Section 10. CHOICE OF LAW. This Indemnity Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
Delaware.

<PAGE>

Section 11. JURISDICTION. The Company and Indemnitee hereby
irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action, suit or proceeding
which arises out of or relates to this Indemnity Agreement, and agree that
any action instituted under this Indemnity Agreement shall be brought only in
the state courts of the State of Delaware.

Section 12. COVERAGE. The provisions of this Indemnity Agreement shall
apply to the Indemnitee's service as a director, officer, employee and/or
agent of the Company and/or at the Company's request, as a director, officer,
employee, trustee and/or agent of another corporation, partnership, joint
venture, trust or other enterprise with respect to all periods of such
service prior to and after the date of this Indemnity Agreement, even though
the Indemnitee may have ceased such service at the time of indemnification
hereunder.

Section 13. ATTORNEYS' FEES. If any action, suit, or proceeding is
commenced in connection with or related to this Indemnity Agreement, the
prevailing party shall be entitled to have its costs and expenses, including,
without limitation, reasonable attorneys' fees and reasonable expenses of
investigation, paid by the losing party.

Section 14. SEVERABILITY. In the event that any provision of this
Indemnity Agreement is determined by a court to require the Company to do or
to fail to do an act that is in violation of any applicable law, such
provision shall be limited or modified in its application to the minimum
extent necessary to avoid a violation of law, and, as so limited or modified,
such provision and the balance of this Indemnity Agreement shall be
enforceable in accordance with their terms.

Section 15. SUCCESSORS AND ASSIGNS. This Indemnity Agreement shall be
binding upon all successors and assigns of the Company, including any
transferee of all or substantially all of its assets and any successor by
merger or otherwise by operation of law, and shall be binding upon and inure
to the benefit of the heirs, executors and administrators of Indemnitee.

Section 16. DESCRIPTIVE HEADINGS. The descriptive headings in this
Indemnity Agreement are included for the convenience of the parties only and
shall not affect the construction of this Indemnity Agreement.

Section 17. COUNTERPARTS. This Indemnity Agreement may be executed in
two counterparts, both of which taken together shall constitute one document.

Section 18. AMENDMENT. No amendment, modification, termination or
cancellation of this Indemnity Agreement shall be effective unless made in
writing and signed by each of the parties hereto.

<PAGE>

IN WITNESS WHEREOF, the Company and Indemnitee have executed this
Indemnity Agreement as of the day and year first above written.

EXCEL LEGACY CORPORATION

By ______________________________

Name: ___________________________
Title: __________________________

INDEMNITEE

_________________________________

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Amendment No. 1 to Form 10 of our reports
dated November 24, 1997 on our audits of the balance sheet of Excel Legacy
Corporation as of November 17, 1997 and the financial statements of Excel
Legacy Corporation Asset Group as of July 31, 1997 and 1996, and for the
years ended July 31, 1997, 1996, and 1995.

COOPERS & LYBRAND, L.L.P.

San Diego, California
February 9, 1998

<PAGE>

EXHIBIT 23.2

[LETTERHEAD OF LATHAM & WATKINS]

February 9, 1998

We hereby consent to the use of our name in the Amendment No. 1 to
Form 10 filed by Excel Legacy Corporation, a Delaware corporation (the
"Company"), with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, for the registration of shares of the
Company's common stock, par value $.01 per share, under the caption "THE
DISTRIBUTION--Material Federal Income Tax Consequences of the Distribution."

Very truly yours,

/s/ LATHAM & WATKINS
--------------------------------
Latham & Watkins